Omnigence Asset Management has released a comprehensive study examining the connection between long-term real interest rates and the performance of Canadian farmland investments. The research, titled “Real Rates and Canadian Farmland Returns: The Market versus Veripath Across Rate Regimes,” analyzes farmland data from 1970 to 2025, focusing on how varying interest rate conditions affect farmland value.
Traditionally seen as a hedge against inflation, Canadian farmland may be more accurately valued by observing long-term real interest rates, according to the study. Real interest rates, which adjust government bond yields for inflation, can influence investor preference between farmland and bonds. The research divides the 56-year period into three distinct real interest rate environments, revealing substantial variations in annual farmland appreciation.
When real interest rates were negative, farmland appreciation averaged 15.2% annually. This figure dropped to 9.7% when rates were between 0% and 4%, and further declined to 1.2% when rates were 4% or higher. The study also noted that negative farmland price years all occurred during periods of positive real interest rates, while significant market drawdowns were concentrated in the high-rate category between 1983 and 1992.
The research further contrasts the national farmland market performance with the Veripath strategy’s returns from 2008 to 2025. During this period, real interest rates ranged from negative 4.0% to positive 3.1%. The Veripath strategy notably outperformed the broader market when real rates were between 0% and 4%, attributed to strategic asset selection and purchasing farmland below average productivity-adjusted prices. Currently, with real rates around 1%, the market remains in this middle category, while rates exceeding 4% have not been seen since 1999.
Stephen Johnston, a director of Omnigence and the lead author of the research, emphasizes the value of real interest rates as a framework for assessing farmland performance, suggesting it provides greater insight than merely considering inflation. The findings aim to assist investment allocators in understanding the effects of changing rate environments on returns and the role of asset selection in performance. Interested parties can request the full paper from Omnigence Asset Management.
About Omnigence
Omnigence is a Canadian alternative investment platform focused on farmland, operational private equity, and secondaries with partner funds managing over $1.2 billion. The firm targets fragmented, unfinancialized investment theses where scale, operational complexity, or size constraints limit participation from larger participants and therefore value is more compelling.
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