New research from Omnigence Asset Management highlights the significant impact of long-term real interest rates on Canadian farmland performance, challenging the traditional view that farmland primarily preserves value during inflationary periods. The study, titled “Real Rates and Canadian Farmland Returns: The Market versus Veripath Across Rate Regimes,” examines farmland data from 1970 to 2025, offering insights into how different interest rate conditions influence investment outcomes.
The research indicates that long-term real interest rates, which account for inflation-adjusted returns on government bonds, are a key factor in farmland price movements. When real interest rates were negative, farmland appreciated at an average annual rate of 15.2%. In contrast, appreciation dropped to 9.7% when real rates were between 0% and 4%, and further declined to 1.2% when rates exceeded 4%. Notably, every negative year for farmland prices occurred during periods of positive real interest rates, with significant market drawdowns concentrated between 1983 and 1992 when rates were at their highest.
Further analysis compares the performance of the Veripath strategy, focusing on asset selection and acquiring underpriced farmland, with the broader market between 2008 and 2025. This period saw real interest rates ranging from negative 4.0% to positive 3.1%. The Veripath strategy outperformed the market most significantly when real rates ranged from 0% to 4%, suggesting a strategic advantage in this environment. Currently, real interest rates sit around 1%, within this middle range.
Stephen Johnston, a director at Omnigence and the lead author of the study, emphasized that understanding real interest rate environments is crucial for investment allocators assessing farmland opportunities. The findings provide historical context for evaluating farmland’s performance under current financial conditions and highlight the importance of strategic asset selection.
The complete research paper is available upon request from Omnigence Asset Management, offering detailed insights for those interested in the implications of real interest rate fluctuations on Canadian farmland investments.
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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