Myths and realities

Myths and realities

How does the PANGEA model work?

PANGEA creates agricultural joint ventures with regional agricultural partners. These agricultural partners retain 100 % ownership over their land in addition to being decision-makers in the management of the joint ventures. What is shared in the joint venture is essentially the equipment that is used in the farming of the agricultural land.

Why is PANGEA proposing this model while others already exist?

PANGEA in an alternative, among others, which complements existing options for farmers, for example FIRA. The PANGEA model is different from existing models for the following reasons:

  • Our model is based on the partnership with farmers in the operations.
  • PANGEA’s investment in the joint venture is in equity, not debt as a bank would.
  • Agricultural partners retain 100 % ownership over their land

We understand that our model is different and that it needs to be learnt.

Is PANGEA an Investment fund?

PANGEA is not an investment fund; it is agricultural operating company. We do not sit behind our screens watching the stock market, we are driving our tractors. Our mission is not to make quick profits by selling agricultural land that we acquire. It is rather to bring the land up to its full potential and ensure its long-term operation in partnership with local farmers.

Does PANGEA seek expansion?

Even with the $ 50 million investment announced in the spring of 2017, the land owned by PANGEA and its agricultural partners (who own on average 40 % of the land cultivated by the joint ventures), will represent less than 0.5% of Quebec’s cultivated land .

To date, PANGEA has established 8 joint ventures in partnership with farming families in Quebec and 1 in Ontario. It expects to create 4 to 6 joint ventures in Ontario by end of 2020.

Who owns the farmed land?

Agricultural partners benefit from the assets of land in three ways:

  • They retain and will always retain 100 % ownership of their land.
  • They have the opportunity to invest their share of profits from the joint venture to purchase additional land at any time. The farmer will always have the priority of purchase.
  • They have a right of first refusal in case PANGEA decides to sell farmland. However, PANGEA’s objective is not to sell land, but to cultivate land.

To date, on average 40 % of the farmland is owned by our agricultural partners.

Does PANGEA contribute to the increase in the property value?

We are sensitive to this issue and that is why we make sure we pay the fair price according to the market value and the agronomic potential of the land by mandating two independent experts for each piece of land we want to buy.

  • The PANGEA model is based on agricultural production, not speculation.
  • Our mission is not to make profits by selling the farmland we acquire.
  • If PANGEA finds out that a farmer is competing to buy land, it withdraws from the process.
  • On many occasions, PANGEA tore up its purchase offer when finding out that a farmer was competing.

In addition, the value of land has been rising for many years, well before we arrived.

According to the latest study by Farm Credit Canada (FCC), the rise in property value is the result of low interest rates and increased crop yield. In addition, the study indicates that farmers, especially crop producers and those in supply-managed sectors, remained the major purchasers of agricultural land in 2017.

Where do PANGEA and its partners buy their equipment and agricultural inputs? In Montreal?

PANGEA and its agricultural partners have a local purchasing policy. Thus, decisions to purchase products and services are made locally by agricultural partners. All purchases are made locally. Investments and expenses incurred generate significant local economic benefits. Since its creation in 2012, PANGEA has invested more than $ 37 million in goods and services in local communities.

Are PANGEA’s agricultural partners employees?

Not at all! PANGEA’s agricultural partners are decision-makers; they are the ones who make the day-to-day decisions such as what will be sown, what equipment to buy, which field will be harvested first, etc. We do not want employees – we want farm owners.

Is your model a threat to young farmers?

80% of our agricultural partners are young farm operators. In comparison, only 14% of field crops farmers are under 40 years old in Quebec.

By providing optimal farm size and shared risks, we help them reduce their indebtedness, access large acreage, and benefit from economies of scale. PANGEA partners with the farmer and invests in equity, not in debt, which is new compared to the traditional farming model. We do not consider ourselves as the only solution to the challenges faced by young farmers, but as an alternative.

Does the agricultural partner assume all the risk?

On the contrary, PANGEA partners with the farmer and invests in equity, not in debt as a bank would, which is new compared to the traditional farming model.

Our model is based on partnerships with farmers in the operations. We share the profits as well as losses incurred by the joint venture. Our goal is to enable farmers to make a good living from agriculture.

Are the joint ventures created by PANGEA profitable?

The PANGEA model creates profitable farms because it:

  • Contributes to operational efficiency through land upgrading (drainage, leveling) which makes farms more productive.
  • Focuses on crops that provide additional value to the farmer, ie each ton of a commodity harvested for human consumption, seed or organic quality, is sold at a higher price than that sold for animal consumption.
    • For example, a ton of wheat for animal consumption is sold at $ 220 / ton, while for human consumption it is sold at $ 280 to $ 320 / ton.
  • Provides access to new technologies that increase the productivity of the farmer.
  • Provides additional areas that allow economies of scale, including optimal use of equipment.
    • For example, the cost of acquiring a combine is the same whether the farmer grows 200 acres or 1,000 acres.

Furthermore, PANGEA’s investment is in equity, not debt as a traditional financial partner would. Thus the joint venture has virtually no debt.

With this model, does the situation of PANGEA's agricultural partners improve?

Absolutely. For example, two of our partners are currently negotiating to acquire additional land on their behalf. A partner has increased its milk quota by almost 50%. The income of the joint venture allowed one of our partner’s spouse who had a job away from the farm to come to work on the farm with her husband. We have several other examples.

Does PANGEA prevent farmers from acquiring land?

We make sure we pay the fair price according to the market value and the agronomic potential of the land by mandating two independent experts for each piece of land we want to buy.

If PANGEA finds out that a farmer is competing to buy land, it withdraws from the process. On many occasions, PANGEA tore up its purchase offer when finding out that a farmer was competing.

According to the latest study by Farm Credit Canada (FCC), the rise in property value is the result of low interest rates and increased crop yield. In addition, the study indicates that farmers, especially crop producers and those in supply-managed sectors, remained the major purchasers of agricultural land in 2017.

Who are PANGEA’s agricultural partners?

Our agricultural partners have different profiles (non-related succession, established farmer, family business) but all share the desire to develop profitable and sustainable farming operations. Through their partnership, they want to be able to grow and diversify the business they have built so it can be transferred to another generation. To view our partners’ profiles, please click here.

How are the profits of the joint venture shared?

As provided in the structure, agricultural partners get 51% of the profits generated by the joint venture since we are partners. At their discretion, they can reinvest their profits to increase their shares or acquire new agricultural land.

What types of crops are grown by joint ventures?

More than 27 types of crops are grown by PANGEA and its partners!

We focus on field crops that are specific to each region and we favor high yield crops that provide added value to the farmer. For example, a ton of wheat for animal consumption is sold at $ 220 / ton, while for human consumption, it is sold at $ 280 to $ 320 / ton.

We are aiming to climb in the value chain with agricultural production for human consumption, seed and organic quality.

How many acres are currently farmed by PANGEA and its partners?

In Quebec, PANGEA and its agricultural partners are currently farming more than 17,500 acres of farmland, accounting for only about 0.3% of the total farmland in Quebec. Currently, almost 40% of this land is owned by our agricultural partners.

In Ontario, Pangea and its agricultural partner are farming 1,600 acres.

Does PANGEA sell the land it acquires?

The PANGEA model is based on agricultural production, not on speculation. Our mission is not to make profits by selling the farmland we acquire. In the event that PANGEA wants to sell land, the agricultural partner will always have a right of first refusal.