Farm amalgamation enables management specialization

Today’s grain growers face a multitude of challenges, from increasing land values and machinery costs to labour shortages and the need to have a variety of specialized skill sets to effectively manage farming operations.

Adapting to and managing these challenges as an individual- or family-run business is becoming increasingly difficult for farmers across the Prairies.

As farms continue to grow, staying competitive requires thinking in a new way about farming and, in particular, the business model under which farms operate.

An interesting model to consider is amalgamating with a number of other farmers to form a mega farm.

The mega farm would then oversee all the farming operations, with participating farmers sharing management, equipment and labour.

There are benefits to such a model, including reducing outputs in terms of machinery costs and allowing for sharing of labour.

If the members of the mega farm are spread out geographically, perhaps across the province, it also allows each member to diversify in that the member farms will grow different crops, have different crop rotations, and experience different growing conditions.

But the biggest benefit is in the ability to strengthen overall management.

Effectively managing a farming operation requires the individual grower to be skilled not just in farming but in marketing, operational issues, finance and human resources.

In sharing management, there is the opportunity to determine the roles required and establish the skill sets that are necessary to carry out those roles. The members of the mega farm can then be matched to the roles that suit their unique skill sets.

This will improve success in the various areas of farm management and reduce the stress on each individual farmer.

Setting up such a mega farm would have to be done properly to ensure that the structure maximizes tax benefits.

Just as importantly, the variety of components the business will require — capital and human re-source planning, buying inputs, selling commodities, day-to-day operations — must be identified, and the roles and job descriptions of the management team must be clearly defined.

Farming is a strong and vibrant industry and it will continue to be so.

Evolving with a different business model will help growers manage the challenges they now struggle with on their own.

Amalgamation can also help address one of the biggest challenges on the western Canadian land base today — the aging population.

Many farm families do not have children who want to take over the farm once the parents retire, but the families might still want to maintain ownership of the land.

To do that, they need a good rate of return. Renting the land to a mega farm that is able to reduce the cost of farming could provide that rate of return and allow families to keep the land in the family name.

MNP has been working with the agriculture industry for more than 65 years.

Through my own work with farmers, I know that amalgamation can be a challenging idea to entertain because operations have been run by individuals and families for so many years.

But as farms grow, producers find themselves dealing in big business and they need to become more specialized if they are going to succeed.

The game has changed and as a result business models need to change too.

By looking at farming in a new way, western Canadian producers have the opportunity to explore amalgamation and perhaps develop a competitive edge over other jurisdictions.

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