Recent tariff threats, both proposed and imposed, have reignited discussions around economic nationalism and the importance of supporting Canadian industries. Investors, particularly institutional players such as pension funds, are increasingly looking for ways to allocate capital domestically to strengthen the national economy while generating attractive returns. This renewed focus on investing in Canada presents a unique opportunity to channel capital into underfunded yet strategically vital sectors—none more compelling than agriculture.

Agriculture is not just an essential pillar of the national economy; it is a sector with solid fundamentals, significant competitive advantages, and a critical role in ensuring food security. However, despite these strengths, Canadian agriculture has suffered from a lack of private investment compared with other industries.  By directing capital into this sector, institutional investors have a unique opportunity to generate attractive, risk-adjusted returns and hedge volatility while contributing to the resilience and sustainability of the national economy.

The Underinvestment Challenge in Canada

Over the last decade, Canada has faced a worrying decline in capital investment relative to its OECD peers. Between 2011 and 2015, Canada ranked 37th out of 47 OECD nations in overall capital investment, and from 2015 to 2023, it fell further to 44th place. This lack of investment has significant implications for industries across the economy, including agriculture.

In the agricultural sector specifically, underinvestment has led to inefficiencies, slower modernization, and an increasing reliance on foreign markets for processing and supply chain functions. Annual capital investment in agricultural equipment and machinery has lagged behind depreciation for over 15 years, resulting in a cumulative shortfall of ~$9 billion1. This shortfall has not only limited productivity but also hindered Canada’s ability to fully capitalize on its natural agricultural advantages including a strong network or established, successful operators for whom capital is the handbrake to growth.

Moreover, Canada’s heavy dependence on countries like the U.S. and China for agricultural processing has exposed the industry to geopolitical risks and market fluctuations. Given the uncertainties surrounding international trade and tariffs, there has never been a more critical time to develop domestic processing infrastructure and strengthen local supply chains. Doing so would not only mitigate these risks but also create jobs, enhance food security, and reinforce Canada’s position as a global agricultural leader.

Why Canadian Agriculture is an Attractive Investment

For institutional investors, particularly those managing pension assets, agriculture offers a compelling value proposition. Unlike crowded sectors where competition for assets can drive down returns or make it difficult to identify attractive opportunities, agriculture remains relatively underinvested, allowing for access to high-quality opportunities at attractive valuations. Several key factors make Canadian agriculture a standout investment opportunity:

1. Strong Macro Tailwinds

With the global population projected to reach nearly 10 billion by 2050, food demand is expected to increase by 35% to 56%2,3. At the same time, total arable land around the globe is declining and in many regions that land which does exist, is coming under pressure from changing growing conditions. Canada, with its abundant arable land, enviable water resources, and an increasingly favorable climate for crop diversification and production, is well-positioned to meet this growing demand. Canada has the potential to enhance its agricultural output, both from a primary production and value-add processing perspective, and global market share significantly, even in the face of potential US tariffs.

2. Inflation Protection and Stability

Farmland and agricultural investments have historically acted as effective inflation hedges. Unlike more volatile asset classes, agricultural land values and food prices tend to rise alongside inflation, making them attractive for investors seeking stability in an uncertain economic environment. Moreover, farmland returns have demonstrated strong historical performance with relatively low correlation to traditional equity and fixed-income markets. Many agri-processors benefit from “cost-plus” business models, providing similar inflation protection further downstream in the value chain.

3. Diverse Investment Avenues

Canadian agriculture offers a broad spectrum of investment opportunities across the value chain, allowing institutional investors to tailor their exposure based on risk appetite and return objectives. From direct farmland ownership and ag-tech ventures to infrastructure projects and private equity in agribusiness, the sector presents multiple pathways for generating long-term, sustainable returns.

Sustainability-focused investment strategies, in particular, have gained traction, with many agricultural operators incorporating regenerative farming practices, carbon sequestration initiatives, and sustainable water management into their business models. These initiatives align well with the environmental, social, and governance (ESG) priorities that increasingly guide institutional capital allocation in Canada.

Addressing Barriers to Investment

Despite the strong investment thesis, institutional participation in agriculture has been relatively limited due to perceived barriers. Key challenges include:

• Market Fragmentation: The sector comprises many small and medium-sized private operators, making it difficult to deploy large-scale capital efficiently.
• Liquidity Concerns: Agricultural investments tend to be longer-term in nature, which may be difficult for some investors to administer.
• Limited Industry Knowledge: Many institutional investors lack familiarity with agricultural markets, creating uncertainty around risk-return expectations.

These challenges, however, are not insurmountable. By partnering with experienced agricultural investment managers, institutional investors can gain the necessary expertise and structuring solutions to navigate the sector effectively. Bonnefield, for example, has played a crucial role in facilitating institutional investment in Canadian farmland and agribusiness, offering tailored investment solutions that address liquidity concerns while delivering stable, long-term returns.

Strengthening Canadian Agriculture Through Smart Investments

For Canadian pension funds and institutional investors, agriculture presents a rare combination of strategic national importance and strong investment potential. While trade uncertainties highlight the need for domestic investment, the case for agriculture goes beyond patriotic duty—it is an opportunity to capitalize on a resilient and undervalued asset class.

For those looking to explore this opportunity, partnering with experienced investment managers can provide access to well-structured, risk-adjusted opportunities. As global market dynamics evolve, the window to secure prime agricultural investments is narrowing. Now is the time to act—not just for Canada’s economic future, but for the compelling financial returns it offers forward-thinking investors.

Sources:

1. Statistics Canada. Table 34-10-0036-01 “Capital and repair expenditures, non-residential tangible assets by industry (x 1,000,000)”; Table 32-10-0049-01 ”Farm Operating Expenses and Depreciation Charges (x 1,000).
2. Suzuki Emi, “World Development Indicators”, The World Bank, July 2019. 
3. Van Dijk Michael, “A Meta-Analysis of Projected Global Food Demand and Population ad Risk of Hunger for the Period 2010-2050” Nature Food, July 2021

Andrea Gruza, President & Managing Partner, Bonnefield Financial

Andrea Gruza is President & Managing Partner at Bonnefield Financial, a leading Canadian farmland and agribusiness investment manager where she oversees Bonnefield activities across all business units, while having direct responsibility for driving fundraising, investor relations, and ESG activities. Additionally, Andrea has responsibility for new product development and is a key driver of the firm's long-term strategy. She is a member of both Bonnefield's farmland and agribusiness Investment Committees.

Andrea is a former investment banker with experience in mergers and acquisitions across multiple industry groups including agriculture, mining and financial institutions. Prior to investment banking, Andrea worked for Risk Management Solutions, the global leader in catastrophe risk modelling where she advised U.K., E.U., and Asian clients in the insurance and reinsurance industries.

Andrea holds an MBA from The University of Chicago Booth School of Busines, an MSc International Political Economy from The London School of Economics, and a Bachelor of Public Affairs and Policy Management from Carleton University.