Is Canada Prepared for Massive Amounts of Farmer Retirements?

Christie Young is the Executive Director of FarmSmart and this week she has created some stir within the Canadian Agriculture industry by saying that our industry is not prepared for the coming mass farmer retirements.  What has really caused the stir is her statement that the government has some sort of responsibility to ensure we prepare ourselves.  Young believes that Canadian government needs to create opportunities for new farmers to enter the industry and ensure our domestic food supply is maintained.  Young made it very clear that she believes the government is doing nothing to encourage people to enter the profession. 

According to Young, 75% of farmers will retire in the next ten years. This number is very staggering but is it something that should scare us or that the government needs to do something about? According to Young 60% of the new retirees plan on passing on the farm to no one.

Should there be a mandatory age of retirement for farmers

The government is doing many things to encourage young people to become farmers.  For example, Farm Credit Canada is a crown corporation that focuses strictly in the area of agriculture.  Their mandate includes creating loan opportunities for farm transitions, farm expansions and farm startups.

The reality of consolidation is prevalent in most industries and farming is no different.  The economics of agriculture present the same reasons for consolidation.  Its is crititical to make sure that returning children or farm employees interested in ownership understand the options available to them for purchasing farm assets if that is what they desire.

The level of the government’s needed involvement in enticing more farmers to enter the industry depends on your objectives.  What is important to Canadian agriculture?  Ask yourself:

  • Is the number of farmers more important than individual farm profitability?
  • In the current system preventing new farmers from entering the industry or is it really the amount of gross dollars needed to buy assets?
  • Is there concern that there will be no one to farm the land after the current farmers retire?
  • Are farmers themselves doing enough to encourage family members or employees to enter the farm business?
  • Should we be looking at the coming concentration of farm land ownership different than the amount of farmers?

I believe that farm owners continued inability to succeed at farm succession transfer is one of the reasons the 60% number is real.  For example,  a 75 year old farmer being unwilling to begin farm ownership transfer to his 50 year old son.  Or what about a 40 year old son not even having signing authority on the farm checking account because his 65 year old mom wants to watch what he spends even though he does all the work?

I also believe that the issue of consolidating farm ownership is different that the number of people willing to farm.  Farm ownership should not define you as a farmer.  I know of several successful farm and livestock operations that own very little land and capital assets and yet they are incredibly financially successful.  Our definition of the “farmer” is evolving.  One of the reasons for this is that land is very expensive and unless it is heavily subsidized there is no government program to allow new entrants.  Who says that you have to own land to farm?  Many of the 70% that are retiring have no plans to sell the land due to its strong value.  They intend to rent out the land to younger farmers which in a way is win win for all parties involved.  The farm stays in the name of the family and is still being farmed by someone that will take care of it like it’s their own.

The current crop of young farmers looks at the opportunity of agriculture differently than their parents.  They seem to be less tied to the land and more tied to the idea of a opportunistic farm business.  A specific piece of land or the amount of land under ownership does not define them.  What defines them is running a successful business which is no different than any other young small business owner in any other industry.

Christie Young has reasons to be concerned about coming farm retirements.  What is much more unclear is what the governments role is to fix it.  As I have mentioned above, there are many young farmers that look at the coming farm retirements as a massive opportunity to expand their farming operation in the future.

Whats your opinion, please write your comments below.

 

Shaun Haney

Shaun grew up on a family seed farm in Southern Alberta. Haney Farms produces, conditions and retails wheat, barley, canola and corn seed. Shaun Haney is the founder of RealAgriculture.com. @shaunhaney

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13 Comments

Andy

Thanks for the article, Shaun. In my area, lots of kids have heard time and time again how much their father’s hate farming and how there is no money in it. Now, when the time has come to pass the farm down, the kids want nothing to do with a hated and unprofitable occupation! Maybe kids DO listen to their parents!

I think the examples that you give about the problem of handing ownership over is a big one -the younger generation gives up trying to work themselves in after years of being treated as employees -or worse! My dad is very good about working me into decision making on our farm and I appreciate that more and more as I hear about the other side.

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Dylan Robinson

In my area between my grandfather and neighbours/cousins there is alot of farmers reaching the age where they are considering retirement. In my family alone I was always discouraged against the business as it is hard with the increase in input and capital costs to start up a reasonably sized farm. In my own situation the price to upgrade to reach a land base that will provide reasonable profits is near double my familys current number and this I believe is the problem behind keeping young farmers out of the business. Especially in alberta many see the financial uupsides of the oil industry and are drawn away from one of canadas and the worlds most important industries, agriculture. If the number of farmers decrease the average size of a farm will just have to increase and this is inevitable in my opinion. Great article.

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Andy

I think that the machinery and input suppliers have done a great job convincing people that big acres are the only way that a farm can be viable! And I don’t think its true. Increasing the land base should be the absolute last option for growth.

Once you have done the absolute best you can on marketing, then start looking at yield increases (only if they actually NET more money, though). Finally, once you have your ROI through yield and marketing maxed out on the land you have, then go get more land!

Marketing is the cheapest option for increasing net profits -it doesn’t require more machinery, employees, land, or storage (unless you are forward pricing).

Increasing yield is next. Might need some new bins, and maybe some more inputs and specialized machinery. No need for more land, and usually your employees and machinery can stay the same unless you are doing more intensive management.

Finally, more land takes more time, or larger equipment -or both! Takes an increase in employees. And more storage to deal with the extra production. And more long term debt…or landlords.

More land should not be the 1st option for a farmer to increase profits. But many farmers these days only seem interested in how big they are, not how profitable they are!

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Kevin

Great post. My concern is that it is so expensive for new farmers to even purchase equipment, never mind land. The last thing we want is the government giving out huge loans and then the new farmers can’t even service the debt. You really need a balanced approach to ensure success.

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Ian

These are great points that have been made. And I’m sure we can List a hundred more! I think that until we see the markets average out a little more. We won’t see any of the younger generation getting into Ag! On the grain or cattle side! I come to realize as of late that you don’t need to own all of your land base, but you need to own some! In my area the older bigger farmers are driving the cost of land and rent so high that the margins would be to thin to live on! That is the wonderful thing about long term investments, you’re supposed to pay them off over time and if the prices fall back down to reality you can’t make go of it! I don’t think you can expect the government to take on this task on its own . These farmers have to know you can’t do it all forever!

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DirtFarmer

Andy, I don’t think a majority of farming Dad’s have treated their kids that way. Succession planning has never been an easy topic, that woud be one of the reasons almost every conference one attends, there is a guest speaker hoping to get that message across. It is tough. With net profits being so slim, retiring farmers have spent their whole lives paying off their land investments, machinery & building upgrades etc. With hindsight being 20/20 like all of us, we should have purchased land 20-30 years ago had that land ready for our children if they choose to get into farming and if not one could have at least sold one of the quarters for a retirement nest egg and handed the rest over to the kids. The more kids you have, the worst that will become. Non-ag related investments have worked its way into agriculture and it makes it tough to compete with that.
If your father wasn’t a huge risk taker than chances are there isn’t enough land to incorporate the kids into the farm, or maybe there is and then the Dad becomes the employee becaue he has nothing to retire on. Right now, owning a lot of property makes sense, at least until the interest rate creaps up and then “retiring farmers” will be the least of our worries.

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Bob Treadway

Retirements and consolidation are matters of concern. The dramatic statement that 75% will retire in the next decade? Questionable. As compelling as it is I point to several counter-trends. Foremost is the bright future for agriculture with accelerating demand, new potential uses, pending transport reforms, and an overlay of technology that reduces human brute force. Automation is reality in many farming disciplines which extends the useful lifespan of farmers. A key factor is whether those aging operators can make the transition from hands-on farmer to manager.
I’ve been directly involved in a number of succession plans on large operations in the U.S. There are many creative methods for insuring and encouraging succession including family corporate reorganization, creation of subsidiaries in the name of successors with revenue streams and expanded rental opportunities. But it is not only a government’s responsibility to insure young farmers get on the ground – it’s the industry’s, the producer’s, the strong alliances that have been build in Canada.

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AdamO

I keep hearing about this promised land where there is more land then farmers and there is unlimited credit to be had from FCC. The reality is that between land hungry farmers and dollar struck investors the chance of purchasing land in the prairies is next to nil and rents are getting so high in many areas that landlords are requiring collateral to back lease payments. As far as FCC goes, well when I started farming 3 years ago they were the least willing to lend unless someone with deep pockets was backing you. The last thing we need is government to get involved and further increase the already bloated land prices. With that said if someone can point me in the direction of this unlimited, almost free land, please let me know I will move to your community and set up shop.

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Kevin Serfas

The staement that 75% of farmers will retire in the next 10 years seems to be a little bit far fetched,if not outrageous to me. I would actually like to know where she came up with the facts to make a statement like this. We are at a time in agriculture when there is finally money to be made so it seems a little bit strange that everyone wants out. With the exception of the fact that as always, succession planning is always a big concern to farmers, I find the idea around Ms.Young’s statements to be bunk. Why on earth would we want government to get more involved? I’m not exactly sure where government fits into this. There will always be farmland in Canada and it will always be farmed. The demographics may change but the end result will be the same.

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Agwag

Every generation has had this discussion. Where o where will the next gen of farmers come from. There are some axioms to take into account: farms don’t get smaller without intervention, intervention (supply management comes to mind) can only slow not halt the process, technology and improved efficiency enable fewer to do more, no productive acre will be left unfarmed due to a lack of farmers. Before you write off the future, attend a progressive farm conference. You will see the exiting demographic, but you will also see an exuberant, optimistic and progressive group of young people who are not driving in the same ruts. They will rock our world, even though they may not follow the same business model from previous generations. Just get out of their way!

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Roger

Shaun your comment on the old retiring farmers holding onto land and planning to sit on it and rent it out to the younger generations didn’t sit well with me. I don’t totally disagree with it, but for an operation to exist and hold very little assets, the chances of them getting swept away in the next economic downturn for farming is much greater. The bit of land that I have been able to buy, has given me equity overtime and that is what bankers like to see. They want stability and an operation that has a solid balance sheet delivers that. Looking back at my parents and grandparents farming career, I’d say they didn’t retire on all the grain the sold, they retired on the sale of the land. So for somebody else to think I am gonna be happy paying them rent till they die is far from my reality. Farming is traditionally an asset based business, and if you take that main asset out of the equation, it is no longer a business model I like.
Great article, and great discussion.

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Dave

Great topic! Farming has to continue to evolve to become more business, less heritage, less trdaition and less birthrite. Government has to learn how to advance the business of farming, and keep away from influencing the industry and producers that result in unintended consequences. For example, the cash filing provision prohibits elderly farmers from selling their farms and facing the tax. Why not create a federally guaranteed tax pool, where sale funds can be rolled in to defer CG tax and taken out as an annuity for retirment – meanwhile the pool being utilized to fund beginning farmers… Young and new entry farmers need to understand that the industry has to be globally competitive – and that means keeping up with progressive areas like Australia, Brazil, and even eastern Europe! It’s time for a long term plan and strategy for Cdn agriculture to renew itself with a progressive, educated and motivated ag business culture. Our future depends on it!

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Richard Barrett

Being a former farmer’s son, I understand first hand the feelings of both sides. It’s emotional for the farm to be past on.
Now, I desire the governments to repel some of it’s regulations. If a farmer is selling directly to a consumer and the consumer desires to take any risk, then the farmer should not have to have inspection, permits, licenses, etc. but Safety a priority.
A group of people should be able to lease land, buy milk cows, pay the Vet bills, feed, slaughter their own beef, have the milk transported to a locked location without the milk going above 6 degrees C. for owners household use. If you agree with this, please inform your MLA and let me know if he agrees or disagrees.
My e-mail is [email protected] Almost all of this is illegal.

Land Investors are on Horizon and are coming over the Hill. Why wouldn’t the retiring farmers sell to them. It is interesting, when food became a Commodity.
Absentee Land Owners is on the rise, especially within an hour of cities.
“Those who restrain others, will not have freedom to move themselves.” RWB

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