Due to the fact that the majority of the desired portfolio for AgriRoots Diversified Lending Fund LP, managed by Agriroots Capital Management Inc., ACMI, in this document we are attempting to establish the market size for Agricultural Lending in Canada outside of the “A” lending space, defined as mainstream banks and the majority of credit unions. The emphasis is on zoned agriculture, but we would like to point out that the Commercial Food Industry may also have a sizable impact on our mortgage market opportunity. We have researched the overall values for the Canadian Agricultural Sector as well as focus on Ontario Agriculture. For full detail breakouts please reference the websites mentioned at the bottom.
Agricultural Market: The fundamental question before deciding to invest capital into the Agricultural (DEBT) Sector in Ontario / Canada are, what is the size of the market opportunity available to AgriRoots Capital Management Inc.?
To evaluate this question research has been performed to determine the following:
What is the size of the market opportunity available? The hard numbers from OMAFRA and Statistics Canada provide that in Canada there is over $468 Billion in Agricultural Real Estate value. In this sector there is total reported Long-Term Debt of over $83 Billion across the country. In Ontario alone, there more than 74,000 farms valued at approximately $127 Billion, reporting Long-Term Debt of $22 Billion. That’s the hard data available.
Within those numbers is where we, at AgriRoots Capital Management Inc., will find our Mortgage Market. What is not available from any source on a tracked empirical basis is…what percentage of this total agricultural market at any one-time falls outside the parameters of “A” Lenders target client profile? For this estimate we rely on the market experience gained over decades from the principals at AgriRoots Capital Management Inc. and their extensive contacts with others within the industry. It is our estimation that 80% of the required capital will be satisfied through the “A” lender market, leaving $4.4 Billion in Ontario and $16.6 Billion across Canada of Agricultural Sector Debt requiring funding via independent credit unions and B Lenders such as ADLF LP.
The individuals within this group will require short-term financing from lenders such as AgriRoots for various reasons. The majority will consist of applicants whose recent financial cash flows and credit bureau histories have been weakened to the point of not being bankable at mainstream financial institutions. The causes of the current situation will have been events deemed outside of the applicant’s control. Causes can vary but some examples are weather related crop failures, unforeseeable significant drop in commodity prices, accident or illness of principal impacting operations, marital breakdown, start-up operations. What these applicants are not short of is demonstrable equity in the land, buildings and equipment and realistic courses of action available to them to return their debt servicing ability and credit bureau scores back to a level that makes their operation mainstream bankable within a maximum 5-year horizon. What they need is a secondary-market lender who can offer flexible credit terms (IE: interest only monthly) for a short-horizon period until the cause of the cash-flow problem can be rectified.
Agricultural data referenced from:
https://www.fcc-fac.ca – Farm Credit Canada
https://www.statcan.gc.ca – Statistics Canada
https://www.mafra.gov.on.ca – Ontario Ministry of Agriculture, Food, and Rural Affairs