Young farmers face financing issues

I am 34 years old with a diploma in civil engineering. I started my farm near Edmonton when I was 21.

I loved the idea of farming and of starting and growing my own business. It took me 10 years to grow from zero acres, to a farm of 5,680 acres with no outside capital.

My biggest struggle has been a lack of available financing. I know Farm Credit Canada has young farmer programs available, and so does Alberta Financial Services Corp. They offer programs almost exclusively based on buying your first tractor, (which is very helpful) or buying your first quarter of land, which is very unhelpful, considering that there isn’t an acre in Alberta that will pay for itself from farming strictly that acre. You need three “paid for” acres to make the payment on that one financed acre, which doesn’t include making any profit on the total four acres.

My business plan is renting whole farms from older farmers, who don’t have anyone interested in taking over. We rent everything: the land, bins, sheds, whatever they offer. This works because I get the land and infrastructure, and they get income to live out their retirement years without selling out.

My business model works. I have proven that it works, as I have grown rapidly with no outside financing.

So let’s talk financing. A farm that I know has a revolving operating line of credit equal to the total gross income that the farm produced in a year. They had this strictly because they owned enough land as collateral that they didn’t need to prove to their lender that it was going to get paid back. I don’t believe that this is uncommon.

It took my farm nine years of proven income and growth to be approved with a line of credit that is equal to 5.5 percent of my gross income, strictly because I don’t own land. I have to rely on the Canadian Canola Growers Association advances, which are helpful, but nowhere near as useful as lines of credit because of the restrictions and time limits that are placed on them.

Now, as we enter year five of declared agricultural disasters in our farming area (Yellowhead and Lac Ste Anne counties), a farm like mine, which is not based on equity and living off the inflation of land, but instead on profitability, is screwed. Despite being able to prove massive profitability in the past, we have no ability to borrow money to cover even a single year of losses. Banks, FCC and the AFSC will lend money only on land equity, which we do not have. The business lenders will not deal in agriculture and tell me to go talk to FCC.

I keep hearing that younger generations don’t want to get involved in farming. This is why. It isn’t about farming at all. FCC and AFSC are land investing crown corporations. Agriculture is laughed out of business lenders’ offices because agriculture is not deemed to be a business or profitable.

Now, as I watch my farm die, I wonder why I didn’t start a civil engineering company? I am confident that if I was in this position in any other business that showed a growth of 40 times the gross revenue over a 12-year period, I could get a loan equal to 19.4 percent of my gross yearly income to keep my cash flow positive.

Without new ideas coming into agriculture, the industry will remain too focussed on farming equity instead of farming for profit. It simply cannot attract a new generation unless they inherit land.

Steele Perrett farms near Evansburg, Alta.

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