The buzz in the world of finance is about banks that are too
big to fail, but at the George Morris Centre, the agricultural think tank
reasons that there are too few farmers left to allow them to fail.
The team studied census and tax data to determine that 15
per cent of Canada’s farmers account for 70 per cent of revenues; that’s a
greater concentration of production than the familiar 20:80 ratio of a decade
ago.
Lead authors Larry Martin and Bob Seguin, who have a
lifetime of experience in studying farm policies and economics, say the current
situation calls for some radical changes in political approaches and government
programs.
Instead of a mish-mash of risk-management programs with
“opaque results,” they argue Canada ought to focus more attention on improving
management skills for the owners and operators of the large farms.
They also challenge those who worry about the demise of the
family farm, a concept that is, they say, hard to define.
And they question the continued need for supply management for the dairy and poultry farmers to provide them with enough clout to deal with large corporations supplying inputs and buying their production.
If the definition is a family that controls the farm
business, then they challenge the public to consider the difference between a
family whose children are younger than five and another whose children are 18
to 25 and fully-engaged in the farm.
They begin their discussion by confirming that the trend to
fewer and larger farms has been going on for a long time, but has speeded up in
the last five years.
For example, the 1981 census counted 318,361 farms and the
2011 census 201,730.
Today’s farm population is older. In 1981, 30 per cent were
55 or older; now it’s almost half. In 1981, 30 per cent were younger than 30;
now it’s 20 per cent.
They say the overall Canadian population is aging, and
today’s 70-year-old is the previous generation’s 60-year old.
There is another factor the paper does not consider. The
1981 census came hard on the heels of a string of highly-profitable years that
enticed a lot of farm children to join the business and borrow heavily to
expand; the 2011 census came after a devastating string of losses in the hog
industry, rapidly-rising costs for poultry and dairy quota and farm land and a general squeeze on farm margins throughout the 1990s.
While they note that averages ignore huge differences among
farms, they point out that gross margins average 22 per cent, after paying for
input costs. That 22 cents on every dollar needs to cover taxes, the cost of
borrowed money, to replace machinery and barns and equipment and provide a return (profit) for the family members.
At those averages, a farm with annual sales of $100,000
isn’t going to survive unless the family has other sources of income.
Another factor driving farms to ever-larger sizes is
advances in technology, such as GPS-linked tractor and combine controls and
no-till cropping for grain farmers, robotic milkers for dairy farms, etc.
The typical farrow-to-finish hog farm is 300 sows, but most
new hog barns are built for 1,200; the typical beef feedlot holds 620 cattle,
but the new ones are for 5,000 or more; a typical dairy barn holds 140 cows,
but the new ones house 240, they say.
Today’s large dairy and poultry farms are better able to handle marketing than when supply management was introduced in the 1970s, the authors argue.
While some point to niche markets as a way for
smaller-scale farms to survive, they note that the large farms can also profit from niche marketing - for example, for their culls.
That prompted me to think of Martin's Family Fruit Farm of Waterloo which recently bought equipment and set up a plant in Elmira to make apple crisp and cider to supplement its business of marketing apples to Canada's largest supermarket chains.
The farms with more than $500,000 sales per year have an
average of $5.3 million in assets and $1.3 million in debts. This calls for
management skills – more brains than brawn.
