Major expansion planned as farmers look to the future

Canadian farmers will be taking on more debt over the next five years.

“It looks to us like farmers are willing to invest,” said Kent Fraser, vice-president of Stratus Ag Research.

“There are lots of farms that are growing, and they look like they are willing to spend some money to fuel that growth.”

That is one of the key findings of a 2018 Stratus survey of 800 farmers with a minimum of $250,000 in annual gross farm sales.

The average farm is carrying $960,000 of debt and is planning to borrow another $1.2 million over the next five years to expand or improve the operation.

Only 11 percent of farms carry debt that is 50 percent or more than the value of their assets, and 20 percent have no debt at all. Those who are debt-free tend to be older farmers planning to exit the business.

Stratus reports that 60 percent of the farmers surveyed plan to spend an average of $380,000 on machinery over the next five years.

Saskatchewan and Alberta had higher averages at $485,000 and $557,000, respectively.

“The size of the farms has got to be a big factor,” said Fraser.

Buying land was the second most popular choice with 39 percent of farmers intending to spend an average of $1.67 million over the next five years.

The averages in Saskatchewan and Alberta were slightly higher at $1.8 million each, while Manitoba’s number was a little lower at $1.3 million.

Third on the priority list was grain storage with 29 percent of farmers planning to invest an average of $123,000. Farmers in the prairie region were far more likely to spend money on grain storage than those in Quebec and Ontario.

A little more than three-quarters of the farmers surveyed are full-time producers with no off-farm income. The average was slightly higher in Alberta and Manitoba and a little lower in Saskatchewan.

When it comes to finding the right lending institution, the top priority is that it has to be able to meet their borrowing needs.

“Farmers are very pragmatic. It’s not about emotion as a lot of consumer decisions might be,” said Fraser.

Other key criteria are finding a lender that knows agriculture and one that is flexible in meeting the farmer’s unique needs.

“In general, Farm Credit (Canada) comes out on top of those things and other matters, which isn’t surprising as someone that specializes in ag lending,” he said.

Credit unions are the second most popular choice followed by the banks. Credit unions received top marks for employing people who farmers trust.

“What that is reflecting is that credit unions are often seen as very much a local organization,” said Fraser.

There tends to be a lot of loyalty with financial institutions. Farmers are not quick to jump from one to another, in part because it is difficult to change, he said.

Fraser noted that the survey was conducted completely independently. The results are then offered for sale to financial institutions and other interested parties.

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