A Breadbasket’s Great Comeback…

Once flyover country, Saskatchewan is a focal point in Canada’s growing economy. So I couldn’t resist dropping in on this resource-rich province. It has become an agricultural power.

Many things come from this one province of Canada that many Americans would have a hard time finding on a map. (Brad Farquhar, who we will hear from shortly, relates the following story: “Once on a flight from Memphis to New Orleans, I sat next to southern woman who asked me where I was from. I told her Saskatchewan. When I told her it was north of Montana and North Dakota, she said to me, [with southern drawl] “Son, there ain’t nothin” north of North Dakota!”) Yet, Saskatchewan makes up a large percentage of the world’s exports in a number of goods:

67 percent of the world’s lentils

56 percent of the world’s peas

25 percent of the world’s mustard

40 percent of the world’s flaxseed

18 percent of the world’s canola

33 percent of the world’s durum

As far as natural resources go, fortune has smiled broadly on this land between the forty-ninth and sixtieth parallels. It is the world’s largest producer of uranium and potash. The former is a critical component in the “nuclear renaissance.” The latter is a key fertilizer. The region is also rich in oil and gas.

These resources have produced abundant cash flows, which you can see in the tax records. At a time when governments everywhere faced gaping budget shortfalls, Saskatchewan has been awash in cash. In 2008, when the financial crisis hit, the province reported a $3.1 billion surplus on a budget of $9.4 billion. Not needing so much money, the government announced the largest cut in personal income taxes in its history. It paid off 40 percent of its provincial debt. Prudently, the government decided to sit on a $2 billion cash cushion, just in case. Today, the government still maintains a surplus, although not nearly as large as in 2008.

Now, once-sleepy Regina (the capital of Saskatchewan) is coming into its own as the commercial hub of Canada’s hottest economy. Regina reminded me of Omaha, another city in a prairie-ocean. The downtown is small, and the city looks and feels mostly new.

I stayed at the elegant Hotel Saskatchewan. Its Manitoba Tyndall stone facade and richly appointed interior are a piece of history, built by the Canadian Pacific Railroad in 1927. Down the street, I saw the headquarters of Viterra, a leading grain handler and processor. Around the corner, a new 20-story office tower was in the works as new headquarters for the fertilizer giant Mosaic.

Brad Farquhar, vice president and partner of Assiniboia Capital, showed me around. (You may remember him from a previous write-up on Canadian farmland). I also met with Doug Emsley, co-founder and president of Assiniboia. I first started writing about Saskatchewan’s farmland in 2008. After my first story, Brad wrote to me. That was in November 2008, and we’ve been correspondents ever since. I’ll have more on Assiniboia in a bit, but first, let’s investigate how far Saskatchewan has come.

From the beginning, people had large ambitions for the province. They thought the population would grow by millions of people and that Saskatchewan would be a great breadbasket, a thriving new land. It didn’t work out that way. Today, the population of the province is only about 1 million people.

The legislative building in Regina reflects what people thought that it would be. It is a massive building, completed in 1912. It’s a big building for the province, even today. In fact, it is the largest capital building in Canada. But events, man-made and natural, would thwart those early ambitions.

The Great Depression hit Saskatchewan with particular force, as it did the American prairie states. Beginning in 1929, Saskatchewan suffered through nine consecutive years of drought and crop failure. The province suffered what must be one of the biggest declines in income suffered by any people anywhere during peacetime. “Incredibly,” writer Edward McCourt tells us in his book Saskatchewan, “the net agricultural income for 1931 and 1932 were reported in minus figures.”

I have a minor hobby interest in the implosion of the 1930s, so I had to explore this a bit further. A reporter in 1934 described the landscape in southern Saskatchewan as “lifeless as ashes… for miles, there was scarcely a thing growing to be seen.” He went on:

“Gaunt cattle and horses with little save their skins to cover their bones stalked about the denuded acres, weakly seeking to crop the malign French weed which seemed to be maintain some sickly growth…. The few people in evidence in the little towns appeared haggard and hopeless.”

I can only imagine how difficult it must have been to carve out a living in this unyielding landscape. It reminds us that no matter how good things look, any agricultural enterprise is at the mercy of the weather.

The Great Depression would have a long-lasting effect. It helped push Saskatchewan politics decisively collectivist. The government would clamp down on enterprise for decades afterward, including a decision in 1975 to nationalize the potash industry. It only recently started to go the other way and loosen up.

Our conversation on these matters led Brad to muse: “In some ways, this place is only now starting to get out from under the effects of the Great Depression.”

Today, the trend is more toward opening up for business. The province, as I pointed out earlier, runs a surplus, virtually unheard-of in governments today, and maintains a AAA rating. Moreover, because of that long, moribund period from the Great Depression until just recently, large chunks of Saskatchewan’s resource-rich land remain untapped.

And that helps explain Assiniboia Capital’s success here, too. Tomorrow I’ll give you a full rundown of that success story and how you can join in. Stay tuned.

A Breadbasket’s Great Comeback… was originally featured in The Daily Resource Hunter. Check out the newest Daily Resource Hunter research video “The Price of Gas Explained”.

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