Farm consolidations, ‘mega-farms’ a growing trend

Statistics Canada’s 2011 Census of Agriculture shows that farms continue to grow, especially on the Prairies. In coming issues The Western Producer will explore the trend toward mega-farms, why it’s happening and what it means to agriculture and rural communities By Sean Pratt, Saskatoon newsroom

One large Saskatchewan farm has swallowed another that was in financial trouble, creating the kind of mega-farm that has become a lightning rod of criticism for some producers.

Broadacre Agriculture Inc., a division of Pike Management Group, has acquired Wigmore Farms of Regina.

The sale includes 40,000 acres of leased and owned farmland in southern Saskatchewan and a pulse processing plant located in Grand Coulee, Sask. The Wigmore family is retaining the six crop input centres it owns in the province.

Ernie Wigmore, former president of Wigmore farms and shareholder in the company, said the farm was placed in jeopardy by a combination of poor growing conditions and crumbling demand for the main crop it produced and processed.

In 2010, the farm had 25,000 acres of lentils ready to harvest.

The first 4,000 acres yielded 40 bushels per acre and graded No. 2. And then it rained for five straight weeks. The remainder of the crop yielded between 12 and 15 bu. per acre and was graded No. 3 or feed.

“We had forward sold a bunch of that crop, so we had to fix that and that took our working capital,” said Wigmore.

The following year the company harvested good crops at its Regina and Mossbank farms but its operation near Torquay was flooded out.

In addition to two years of production problems, the demand for lentils dried up in 2011 from the lack of available credit in importing nations due to the European banking crisis and currency volatility in many of those markets.

“That is the profound dilemma of marketing grains — how suddenly a product that had the interest of the world nobody wants,” said Wigmore.

Circumstances forced the 74-year-old retired doctor, whose family had been farming in Saskatchewan for more than 100 years, to consider leaving the business.

“I had some cash flow problems. I either had to change my investment holdings or take on another shareholder. In my search of that I offered the shares and they were gone. But I had the resources to continue if I wanted to,” he said.

Gary Pike, chief executive officer of Broadacre, said the offer was too good to pass up.

“We saw this as an opportunity with a plant and some very good land,” he said.

It also spreads out Broadacre’s land holdings so the company won’t be held hostage to the vagaries of weather, insects and disease.

“We had land in the north, so we needed some land in the south. It diversified our situation greatly,” said Pike.

Broadacre now farms 75,000 acres scattered throughout the province, about one-third of which is owned.

Wigmore and Broadacre employed similar models of farming, acquiring or leasing large tracts of land from growers and taking advantage of the resulting economies of scale and vertical integration to drive down costs and spread out risk.

They say the model makes economic sense but other farmers don’t like the bigger-is-better trend unfolding in Western Canada.

According to the 2011 Census of Agriculture, the average Canadian farm size grew by seven percent since the last census in 2006.

The trend is more pronounced in the prairie region where the average farm grew by 13 percent in Manitoba, 15 percent in Saskatchewan and 11 percent in Alberta.

“If all of prairie western agriculture goes that route it’s just another scale up and the emptying out of the countryside,” said National Farmers Union president Terry Boehm.

He doesn’t have any bone to pick with the Broadacre/Wigmore deal but he wonders if it’s appropriate when massive farms receive millions of dollars in business risk management funds.

“In terms of public policy, what do we want? Do we want farmers on the land or do we just want to scale up?” said Boehm.

He believes there are big risks associated with financing such mega operations. It reminds him of the large Bonanza farms of the 1920s that failed and were split into smaller farms when commodity prices crashed.

Another grower from Alberta, who didn’t want his name published for fear of reprisal, wonders how a young farmer, or even an established one, can buy land and compete with a firm financed with “an unlimited supply” of investor money.

“There’s no way nobody can compete with that. It’s government’s responsibility to do something about it but I don’t think they ever will because the trend is for bigger and bigger all the time,” he said.

Pike insists that operations like Broadacre are not driving up land costs and emptying rural communities.

“Broadacre is a farm in the true sense in that we own the equipment, purchase all the inputs and actually physically operate it,” he said.

The board of directors is made up of farmers and Broadacre’s three farm managers all have equity in the company.

“This is not a land play. We’re not just a land speculation operation. The actual profit generation is done through farming,” he said.

The company deals with local input providers, buying so much fuel in some locations that the retailer has had to revamp its facilities.

Broadacre has done custom feeding and harvesting in the regions where it operates.

“We’re like any other good neighbour,” said Pike.

The farm will continue expanding at a measured pace in Saskatchewan, the neighbouring provinces and even south of the border.

“We’re growing slowly but surely. We don’t plan on taking on the world by any means,” said Pike.

“There are lots of farms that are bigger than us. We’re watching those models carefully and want to grow responsibly.”

Boehm said the latest takeover highlights the financial risks of farming on such a grand scale.

“Wigmore farms failed and now another farm comes along and doubles on that scale,” he said.

Wigmore said he could have kept the farm afloat if he had sold off some assets or sought additional capital from a financial institution but he wasn’t prepared to “climb that ladder.”

It has been 38 years since he bought his first 1,000 acre parcel of land near Regina.

He has been involved in farming since he was a boy milking dairy cows before heading off to school. So retiring from the business feels a little strange.

“For the first time in my life I wake up and there is nothing I have to do,” said Wigmore.

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