Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with almost $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios. Agcapita publishes a monthly Agriculture Brief which deals with agriculture specific investment issues along with big picture macro-economic issues.

1. Agriculture Brief
Vol. 2, No. 3
May, 2009
1

2. Monthly Highlights
The average value of farmland in Saskatchewan increased by 8.8% in
the second half of 2008 and 15% for the year according to the Farm
Credit Canada Farmland Values Report. This represents the largest
increase ever seen in Saskatchewan since the first publication of the
report in 1984.
Gold and farmland are two assets to have held up during the financial
crisis.
The farm consolidation trend in Canada continues - farms are getting
bigger.
The trend in the gold/equities ratio looks challenging for stocks
moving forward.
Real interest rates appear to be negative in almost every major
economy in the world - inflation is sure to follow.
Monthly Highlights
2 Saskatchewan Land up 15%
3 Farmland Financial Characteristics
4 Global Review of Agriculture Funds
5 Farm Consolidation in Canada
9 Gold and Farmland Resist Crisis
10 Real Interest Rates Negative
1

3. Farmland Update
SaSkatchewan Land PriceS
The average value of farmland in Saskatchewan of 5.6% and 7.8% in the previous two reporting
increased by 8.8% in the second half of 2008 and periods.
15% for the year according to the Farm Credit
Canada Farmland Values Report. This represents the On average, Saskatchewan farmland values have
largest increase ever seen in Saskatchewan since the increased approximately 1% per month over the
first publication of the report in 1984. trailing 18-month period. Only Alberta, British
Columbia and Manitoba experienced similar size
For Saskatchewan, this was the third consecutive price movements. The complete report is available at
semi-annual increase over 5% and followed increases www.FarmlandValues.ca.
SaSkatchewan Semi-annuaL Price increaSeS
Saskatchewan Semi-annual Price Increases Source: Farm Credit Canada
8.8%
7.8%
5.6%
2.9% 3.0%
1.9%
1.0% 1.2% 1.1% 1.3%
0.8% 0.8% 0.5% 0.8%
0.3% 0.2%
0.0%
-0.5%
-1.0%-1.2%-1.1%
-4.3%
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Source: Farm Credit Canada
Source: Farm Credit Canada
2

4. Farmland Update (continued)
All three prairie provinces saw solid increases, Agcapita believes this is a good demonstration of two
Saskatchewan Alberta and Manitoba increased of its key investment premises – that farmland globally
15%, 9% and 11% respectively, with Saskatchewan has solid fundamentals and that Saskatchewan
increasing at a noticeably faster rate and appearing farmland is materially under-priced in relation to
to be starting the process of closing the gap on its similar land in either Alberta or Manitoba.
neighbours.
canada FarmLand Price increaSeS
Region First Half 2008 Second Half 2008 Annual
PEI -2.4 0 -2.4%
NL 0 4 4.0%
BC 3 2.3 5.4%
NB -0.3 6.3 6.0%
ON 5.6 1.9 7.6%
AB 6.7 2.2 9.0%
NS 5.2 4.3 9.7%
MB 6.2 4.2 10.7%
QC 5.5 5.9 11.7%
SK 5.6 8.8 14.9%
Source: Farm Credit Canada
FinanciaL characteriSticS
Farmland provides a total return from: Farmland is potentially one of the most recession-
- the sale of agricultural commodities; and proof forms of investment available because returns
- appreciation in the capital value of farmland. are supported by:
- long term food supply and demand fundamentals;
Farmland offers: nOt
- an uncorrelated sources of returns that is - the global economic cycle.
substantially less volatile than other commodity
linked investments.
- a natural hedge against inflation and
- a viable real asset alternative for property
investors.
3

5. Farmland Update (continued)
gLObaL review OF agricuLture FundS
Agriculture, and particularly farmland, as an asset − Pergam Finance: raised $70 million for
class remains in its infancy. The financial crisis does investment in agriculture in Latin America
not appear to have impacted investor interest and − Landkom: raised $100 million for a farming
capital is still being raised in the sector. Expectations operation in Ukraine
are for even larger amounts to be raised and − Black Earth: raised $100 million for a farming
deployed as investors seek to increase weightings operation in Russia
to agriculture globally. This presents a challenge − Agcapita Farmland Investment Partnership:
because, for example, while there are currently raised $18 million for investment in Canadian
over 1,000 listed oil, gas and mining companies farmland
in Canada, there are less than 10 pure agriculture − Agrifirma: raised $20 million for investment in
related Canadian stocks. The typical approach Brazilian farmland
therefore appears to be for investments to be made − Braemar Group: raised $20 million for
via private equity style vehicles such as the funds investment in UK farmland
listed below.
Open Funds:
Closed Funds: − Insight Agriculture Fund: target raise of $250
− Hancock Agricultural Investment Group: $900 million for global agriculture investments
million for US farmland − Emergent Asset Management: target raise of
− Blackrock: raised $250 million for investment in $200 million for investment in Sub-Saharan
UK farmland Africa farmland
− Macquarie Pastoral Fund: raised US$500 − Agcapita Farmland Fund II: target raise of $20
million for livestock investments in Australia million for investment in Canadian farmland
inStitutiOnaL inveStOrS currentLy dePLOying caPitaL Or inveStigating dePLOying
caPitaL in agricuLture and FarmLand inveSting:
− Credit Suisse − Scotia Bank
− UBS − Toronto Dominion
− Schroders − Canadian Imperial Bank of Commerce
− Barings Brothers − Research Capital
− Oppenheimer − Canaccord Capital
− Nomura − Dundee Securities
− Bank of Montreal − ING
− Royal Bank of Canada − Research Capital
4

6. Farmland Update (continued)
canadian agricuLturaL uPdate
The agricultural sector is undergoing significant The number of farms reporting $250,000 or more
transformation, in particular there is a continued in gross farm receipts continues to increase.
trend toward fewer and larger farms. The production These farms represented 17% of all farms in 2006
of agricultural commodities in Canada is becoming compared to 3% in 1981. This trend is expected
more concentrated on larger farms as the share of to continue as farms expand and become larger
production of these large farms has grown in recent to capture economies of scale and improve their
years. competitiveness in the world economy.
Over the past 50 years, average farm size has tripled
while the number of farms in Canada has declined. In number and Percent OF cenSuS FarmS
2006, there were 229,373 farms, representing a 7% with grOSS Farm receiPtS OF $250,000
decline from 2001. This compares to a 11% decline and Over*, 1981-2006
between 1996 and 2001. At the same time, the
Thousands
average farm size is becoming larger. Technological of Farms
advances and increasing productivity have enabled
45
increasing scale of operations and consolidation. 17.0%
40
13.9%
Agcapita’s expectation is that this consolidation driver 35
30
will be another factor in increasing farmland values 25
9.7%
7.8%
across western Canada. 20 5.7%
15 3.5%
10
number and Size OF FarmS in canada, 5
0
1941-2006 1981 1986 1991 1996 2001 2006
Thousands of Average Farm Sources: Statistics Canada, Census of Agriculture, various years.
Farms Size In Acres Note: * At constant 2005 prices.
800 Number of Farms 800
Average Farm Size
700 700
600 600
500 500
400 400
300 300
200 200
100 100
0 0
1941 1956 1966 1976 1986 1996 2006
Sources: Statistics Canada, Census of Agriculture, various years.
5

7. Farmland Update (continued)
Larger farms, which make up a small share of all No-till practices are becoming more popular as they
farms, now account for a greater share of production. reduce input costs and soil erosion from wind and
In 1996, farms with less than $100,000 in farm water. No-till practices increased by 52% between
receipts represented 72% of all farms and accounted 2001 and 2006. Conventional tillage decreased by
for 8% of all farm receipts, while farms with more than 32%. In 2006, about 70% of cropland was cultivated
$250,000 in sales represented 10% of all farms and using no-till or conservation tillage.
56% of total farm receipts.
Share OF FarmS and grOSS Farm tiLLage PracticeS in canada, 1991-2006
revenueS by Farm Size, 1996
Percent of
Percent Tilled Acres
60 80
50 Farms Conventional
Gross Revenue Conservation
40 60 No-Till
30
20 40
10
0 20
under $10,000- $100,000- $250,000- $500,000- $1,000,000-
$10,000 $99,999 $249,999 $499,999 $999,999 and over
0
1991 1996 2001 2006
Sources: Statistics Canada, 1996 Census of Agriculture.
Sources: Statistics Canada, Census of Agriculture, various years.
6

8. Farmland Update (continued)
FirSt wOrLd v. emerging marketS Farming
A poor transport and storage infrastructure means infrastructure 7 percent of Brazil’s soybeans and up
that agribusinesses in emerging markets frequently to 12 percent of its rice spoil before reaching either
operate at a disadvantage to their competitors ports or customers. In all, Brazil wastes 26 million
in the developed world. For example, the cost of tons of food each year—enough to feed 35 million
transporting soybeans, Brazil’s most valuable export people. Most of this waste occurs between harvest
crop, to port is nearly twice as high in Brazil as in and storage.
the United States. Worse, because of this poor
Latin american agribuSineSS
Availability of arable land
Area with agricultural Total area, Current agricultural Population density, number
potential. million sq km million sq km utilization of area of inhabitants per sq km
with potential, %
Brazil 4.1 8.5 17 21
Argentina 1.7 2.8 18 14
United States 2.9 9.6 66 31
China 2.9 9.6 47 142
India 2.9 3.3 73 354
Source: Censo Nacional Agropecuario, INDEC. 2002; CIA World Factbook, 2005; Economist Intelligence Unit, 2005; FAO, 2003; Global
Insight, 2005; IBGE, 1996; McKinsey analysis
7

9. Agricultural Outlook
chineSe demand - hOw big?
Just how potentially large is future Chinese demand
for agricultural commodities? To use a simple but
powerful example: “If every person in China ate 2
extra eggs a week it would use all the grain that
Canada produces to feed the chickens.”
As can be seen from the charts below, China has
become the worlds largest consumer of commodities
over the last decade in absolute terms. However,
China still ranks very low on a per capita basis.
Continued growth in China will create even greater
commodity demand and in particular put pressure on
agricultural commodity production to keep up.
china iS aLready One OF the LargeSt cOmmOdity cOnSumerS On the PLanet
Grain (Million tons) Meat (Million tons) Oil (Million BOPD)
600 90 30
400 60 20
200 30 10
0 0 0
‘60 ‘90 ‘60 ‘95 ‘60 ‘95
Coal (Million tons) Steel (Million tons) Fertilizer (Million tons)
900 300 60
600 200 40
300 100 20
0 0 0
‘60 ‘90 ‘90 ‘00 ‘50 ‘95
USA China
8

10. Global Macro Outlook
what aSSetS have heLd uP recentLy? hard aSSetS v. StOckS
In a recent article written by Chris Mayer, he notes In a recent article by Bill Bonner he writes “We don’t
that “gold has held up well while most everything take note of the Dow-Gold ratio on a daily basis, but
else has taken a beating over the last year. On a for the record, it stands today at roughly 9:1. For
recent conference call with investors, First Eagle fund the uninitiated, let’s back up. The chart measures
manager Abhay Deshpande points out that gold is at the number of ounces of gold it would take to buy all
a new high in just about every currency apart from the 30 Dow stocks. So in 1980 for example, when the
U.S. dollar and Japanese yen. “It has performed its Dow sat around 800 and gold was $800 an ounce,
job for everyone in these countries,” he says. “It has the ratio was 1:1. At the height of the tech bubble in
held its value.”” Source: Capital and Crisis. 1999, it was 44:1.”
The other asset that has held up and in western “Notice where we are now... and where in all
Canada even increased in value during the crisis – likelihood we’re going based on what’s happened
farmland. before. ‘That last drop of gold, from 9 ounces to the
1-2 ounce range can bring a lot of hurt to the stock
market along the way.’ Source: Daily Reckoning.
dOeS the dOw/gOLd ratiO indicate Further dOwnSide in StOckS?
dow vs. gold ratio 1896-Present
44 oz
1999
# of gold oz. to buy dow
40
28 oz
30 1966
18 oz
20 1929
10
0
1 oz 2 oz 1 oz 9 oz
1896 1932 1980 Present
WWW.ARGORAFINANCIAL.COM
9

11. Global Macro Outlook (continued)
currency devaLuatiOn aLive and weLL
“What marks our Great Recession for greatness is response is 3 times more (adjusted to today’s dollars)
neither the loss of jobs nor the shrinkage in GDP,” than the U.S. spent to fight WWII. It is 12 times more
says James Grant, editor of Grant’s Interest Rate (relative to GDP) than the total committed to fight the
Observer, “but the immensity of the federal response Great Depression.”
to those afflictions. The scale of the government’s
intervention is much more than unprecedented. reaL rateS negative gLObaLLy?
Before 2008, it was unimaginable. We have reached
the ‘kitchen sink’ phase of US counter-cyclical policy. Assuming that headline inflation rates are in excess
To try to exorcise the Great Depression, President of 2% in most developed nations regardless of what
Herbert Hoover deployed fiscal and monetary heavily massaged government inflation numbers
stimulus equivalent to 8.3% of gross domestic are indicating then we are in an environment of
product,” says Grant. “To banish the demons of synchronized negative real interest rates globally, with
2008-9, successive administrations have spent, or highly inflationary consequences to follow.
encouraged to printed, the equivalent to 28.9% of
GDP. A macroeconomist from Mars, judging by these
data alone, would never guess how much more centraL bank Overnight rateS
severe was that depression than this recession. The
decline in real GDP from August 1929 to March 1933 6%
amounted to 27%; that from December 2007 to
date, just 1.8%... so for a slump 1/15 as severe as 5
the Depression, our 21st-century economy doctors
administered a course of treatment more than three 4
times as costly.”
3
“Just looking at the numbers, the toll will be UK
monstrous,” writes Bill Bonner, editor of the Daily US
Japan 2
Reckoning. “All over the world, interest rates have Canada
been cut and budgets padded. France’s deficit is Euro Zone
1
running at 8% of GDP. England is running a deficit of
more than 12% of GDP. And the U.S. is mobilizing 0
as if it had been attacked by Martians. On the credit 07 08 09
side, the feds have cut rates more than ever before, Source: Reuters EcoWin
for a monetary boost equivalent to 18% of GDP,
according to Grant. As to spending, $13 trillion has
been pledged...an amount equivalent to a full year’s
annual output of the United States of America. This
10

12. diScLaimer:
The information, opinions, estimates, projections and other materials
contained here in are provided as the date hereof and are subject to change
without notice. Some of the information, opinions, estimates, projections
and other materials contained herein have been obtained from numerous
sources and Agcapita Partners LP (“AGCAPITA”) and its affiliates make
every effort to ensure that the contents hereof have been compiled or
derived from sources believed to be reliable and to contain information and
opinions which are accurate and complete. However, neither AGCAPITA
nor its affiliates have independently verified or make any representation or
warranty, express or implied, in respect thereof, take no responsibility for
any errors and omissions which maybe contained herein or accept any
liability whatsoever for any loss arising from any use of or reliance on the
information, opinions, estimates, projections and other materials contained
herein whether relied upon by the recipient or user or any other third
party (including, without limitation, any customer of the recipient or user).
Information may be available to AGCAPITA and/or its affiliates that is not
reflected herein. The information, opinions, estimates, projections and other
materials contained herein are not to be construed as an offer to sell, a
solicitation for or an offer to buy, any products or services referenced herein
(including, without limitation, any commodities, securities or other financial
instruments), nor shall such information, opinions, estimates, projections and
other materials be considered as investment advice or as a recommendation
to enter into any transaction. Additional information is available by contacting
AGCAPITA or its relevant affiliate directly.
#400, 2424 4th Street Sw tel: +1.403.218.6506 www.agcapita.com
calgary, alberta t2S 2t4 Fax: +1.403.266.1541
canada