Big farm vs. small farm: survival of the fittest

Everybody has an opinion during coffee shop debates about optimal farm size and sustainability, and it seems every opinion is correct. We asked, which farms are sustainable in troubled times?

It depends on who you talk to.

First we talked to farm management consultant Peter Manness, who works out of the MNP office in Brandon. His client list includes the whole range of farm sizes, and he says making a determination on whether a big small or a small farm is more sustainable is just about impossible. It all depends on the management abilities of the operator.

“People place a lot of emphasis on economy of scale, but that benefit is much smaller than they think,” says the agrologist, adding that economy of scale will not fix poor management.

“If you’re thinking you want one of those new twin rotor John Deere combines, then you’re going to need a significant bunch of acres to justify it, but if you’re looking at how to be successful and you don’t mind pulling some wrenches, then you can be sustainable on a smaller number of acres with less debt.

“On my Dad’s farm, for example, 30 years ago we used to buy a new combine every two years. We can’t do that anymore and stay the same size, but we can remain profitable and sustainable without adding a bunch of new acres.”

Manness said three factors provoke the demise of many large farms: debt, staff and inability to manage the agronomy.

“There are some large farms that are very successful, but there’s also a management void on many of them,” he said.

“Those are the ones we read about when they go belly up. Their numbers are so sensational.”

Manness said many expanding farmers don’t understand they can’t grow their way into profitability. If you’re not profitable at 1,000 acres, he added, you probably won’t be profitable at 2,000 acres. And if you’re not profitable at 4,000 acres, you won’t be profitable at 16,000 acres.

“We emphasize to our clients that they should first strive to be better and then secondly be bigger,” he said.

“If I were to identify my most profitable clients on a per-acre basis, they would be in that 3,000-to-5,000 acre range. On average, they don’t carry as much debt as big farms and they don’t have all the expense and hassle associated with a big staff and big payroll.

“I just had this conversation today with a client. I think the hard part (in a big farm) is the people component. You need some type of corporate governance structure that allows you to manage a bigger business than you’re accustomed to. The people component is one of the biggest factors leading to farm failure in big farms.”

A big farmer benefits from economy of scale in making purchases. He also benefits from a substantial cash flow, which allows him to always use the latest technology, according to Mitch Rezansoff, executive director of the Canadian Association of Agri-Retailers and a former precision ag specialist with Enns Brothers John Deere dealerships in Manitoba.

“I would say both types of farm are sustainable when we get into troubled times,” said Rezansoff, adding that the large farm can afford to adapt to new technology, which will make him more efficient.

“The smaller farmer will be more hands on and do a good job of managing each square foot. The large farmer can’t do that, but he makes up for it by buying technology that helps him better manage the whole farm. That’s where the economy of scale benefits the large operator.”

Rezansoff said most equipment built since 2010 comes from the factory with early versions of the technology that’s standard equipment today. That means the smaller farmer buying second generation or third generation used equipment is able to gain much of the benefit of built-in precision ag technology. That was not the case 10 years ago.

Keystone Agricultural Producers president Bill Campbell, farms 2,640 acres, which makes him a self-described small farmer. He crops 1,700 acres and runs a 90-cow purebred Limousin cattle operation near Minto, Man.

Campbell uses autosteer, and he has yield and moisture sensors on the combine. He runs on-farm trials every year, comparing different varieties and different fertility rates. He said he’s always trying to find the most efficient practices relevant to his farm, but he has not immersed himself in the latest variable rate and precision ag technology.

Campbell said the rise of large farms can only come at the expense and amalgamation of small farms. The small farmer may have no regrets about retiring and selling out, but the affect on the rural community is often one less family. While that may not seem significant, the underlying consequence of fewer people is that rural society shrinks and social support systems shrink.

“As we see the trend toward larger farms, we see the change in rural communities in terms of people socializing and working together. The remaining farm families feel more isolated,” said Campbell, adding that there’s a significant impact when the curling club, the drug store and the high school shut down.

The human aspect of security and sustainability is undermined when people can’t see their closest neighbor’s yard light, he said.

“The large farmer may have the latest technology, but there’s no way he knows his land if he’s working 15,000 or 20,000 acres,” he said.

“I’m not sure technology makes up for that. Digital imagery doesn’t tell you as much about each acre as if you yourself works that same acre year after year. Or, if you’re running 800 cows, how can you possibly know if you have some sick ones out there?”

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