Farm leaders, industry players and even government officials were assertive last week in telling Canada’s agriculture ministers about the barriers to entry faced by new farmers and new generations of farm families.
Unfortunately, their points were largely dismissed by the guy running the agriculture show in Canada.
Federal agriculture minister Gerry Ritz said the problem of barriers to new entrants is not new, and can’t be solved with simple solutions or program fixes. Instead, the next generation must think about farming as a profit-motivated business.
Read Also
Agriculture needs to prepare for government spending cuts
As government makes necessary cuts to spending, what can be reduced or restructured in the budgets for agriculture?
That’s an interesting argument. It’s quite likely that farmers of previous generations also appreciated the prospect of profit, if weather and policy stayed out of their way.
In any case, most business-related policy is — or at least, should be — developed to provide something of a level playing field. That’s not happening in farming, or in some cases, family business in general.
As Agricultural Producers Association of Saskatchewan president Norm Hall said, land prices and succession rules are tough hurdles for new farmers to clear.
One unfair hurdle is that fund management companies can harness RRSP money to invest in land.
“That really bids up the price of land and disadvantages the ability of farmers to compete for land,” Hall said he told agriculture ministers at their recent meeting.
Individual farmers don’t have this option, which is particularly unfair if they also live on the farm. If first-time urban home buyers can leverage their RRSP funds to buy real estate, why not farmers?
Young farmers would not likely have enough in their RRSPs to change the land price landscape because RRSP contributions are subject to ceilings and based on earned income.
However, they may have enough to leverage some borrowing, so changing this rule would make a lot of sense.
There is also a Canada Revenue Agency rule that makes an incorporated farm or other family business ineligible for the capital gains exemption if it is sold to a child’s company by a parent. (A personal sale is a separate matter.) However, a sale outside the family is eligible for the exemption.
If parents want to sell their shares to the child’s company, the entire amount is taxable. If an outside party buys the shares, the exemption applies to the first $750,000, which rises to $800,000 next year.
What if the parents need the money to pay debt or fund their retirement? Will they be able to accept the child’s offer?
“That simply discourages farms staying in the family,” said Hall, in what is a polite understatement.
This sort of policy has nothing to do with farm support programs. It’s simply unfair policy that can trip up the best succession plans of family farms.
Succession is crucial to the future of agriculture because most farmers, in-cluding those doing the real work on big, non-family corporate farms, learn the job on the family farm.
It’s true, as Ritz said, that there are some good programs to help new entrants, such as the Farm Credit Canada borrowing program for young farmers. It’s also true that entrants should be able to produce a decent business case.
These are not at issue. The issue is that unfair tax and investment policies discriminate against new and family farmers.
There’s a great new crop of young farmers out there, who may soon be challenged by higher interest rates and lower crop prices on top of high land prices. They may not need farm programs, but they deserve good policy.
