When asked what they want to be when they grow up, a lot of young children will answer, “I want to be a farmer.”
This hasn’t changed much over time, but the likelihood that the wish will come true has changed, depending on the definition of a farm.
The number of farms in Canada continues to fall, while the average farm size continues to grow.
Farming is big business — maybe not by Fortune 500 company standards but big just the same.
Read Also
AI expected to make itself felt in food systems
Artificial intelligence is already transforming the food we eat, how farmers produce it and how it reaches the consumer, experts say
Statistics Canada reports that farms with $2 to $3.5 million in invested capital increased 37.3 percent from 2001 to 2006.
Farms with more than $3.5 million increased 80.4 percent, while the number of farms with sales of more than $2 million increased by 29.5 percent.
A similar pattern exists in the United States. Farms with more than $1 million in sales represented 59 percent of all U.S. agriculture production in 2007, compared to 47 percent in 2002.
Another trend sees more of the land that is farmed being rented.
Agriculture is a hot topic, with investors looking at farmland as a good investment.
In the past, a retiring farmer generally sold his land. However, optimism in the sector and appreciating land values means ownership is not changing as often.
These trends illustrate the need to re-examine what owning a farm means.
It used to mean owning most of the land and all the buildings and equipment. The ownership group generally consisted of two people.
This isn’t always the case anymore.
Think of the situation in terms of succession.
It may be an oversimplification, but Mom and Dad typically sold the farm to the eldest son. If there were no farmers in the family, they sold the land to someone else and had an auction sale. This pattern repeated itself as farms were sold in their entirety, re-capitalized and started over.
Succession planning on today’s farms reveals more transactions in which shares of a farm are sold, as opposed to actual farmland.
Consider the trend to larger farm size and now ratchet forward 10 years. How will we be managing succession at that time? How will farms be owned? Who will have the opportunity to own a farm?
Thinking about farm ownership from a different perspective presents a couple of possibilities.
There are models where a large, nucleus farm provides the management and equipment. They enter into contractual arrangements with neighbours who want to farm but are unable to for various reasons.
They are often smaller operations with aging equipment and will sometimes have part-time off-farm employment. They contribute their land to the nucleus farm, although they don’t necessarily lease it.
They provide labour and receive a share of the profit as defined within the contractual agreement. This provides them with the opportunity to continue to farm.
From a succession perspective, it creates the opportunity for a son or daughter to farm, which in a traditional sense would never have happened.
Another possibility is to provide an opportunity for an arm’s length employee to own part of the farm, not in the traditional sense but by owning a share of a farm.
This possibility can be used to recruit and retain key employees. The shares can be bought back if the arrangement doesn’t work out.
It seems that we are, in a sense, coming full circle. There may have been a time when a child stating “I want to be a farmer” was met with skepticism, but by adapting to the changing farm landscape and looking at it from a new perspective, it doesn’t have to be a pipe dream.
Terry Betker is a farm management consultant based in Winnipeg, Manitoba. He can be reached at 204.782.8200 or terry.
