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Canadian Farmland Trends: Fewer Farms, Older Operators

Written by on Monday, 24 February 2014 1:37 pm

A new report from Statistics Canada says the trend to fewer but larger farms, operated by older farmers, has made a significant change to the structure of agriculture during the last two decades.

Meanwhile, a Re/Max report says that peak commodity prices combined with low interest rates and limited inventory levels continue to push farmland prices higher.

"The primary drivers in the market continue to be end-users - established farm operators expanding existing operations," says Eldon Ash, regional vice-president of Re/Max of Western Canada. "There are many buyers waiting in the wings, but momentum is hampered to some extent by a shortage of farmland listings."

Statistics Canada says that since 1991, the average farm area increased from 198 to 778 acres, while the number of farm operators dropped by 24.8 per cent. It says there were 280,043 farms in 1991 but by 2011 the number declined to 205,730.

"The trends of fewer operators and fewer farms show no signs of reversing and could indicate significant turnover in farm assets in the future," says Statistics Canada's Martin Beaulieu in the report.

Re/Max says that private and exclusive farm transactions account for as much as 50 per cent of farm sales. Deals with neighbours are common.

"The competition among expanding farm operators is creating difficulty for young start-ups, smaller operators and new immigrants, with affordability a serious issue," says Re/Max.

"Programs offered by Farm Credit Canada are helping some make the foray into the business. Others are realizing the dream of farmland ownership through the help of older farmers and/or relatives. Ultimately the result has been fewer, but larger farms overall - a trend that holds up from coast-to-coast."

It says succession is also limiting the amount of farmland that's available for sale. Rental rates for farmland are also experiencing strong growth. "The income potential - particularly given the poor return on other financial investment vehicles - is another factor exacerbating limited inventory levels," says Re/Max.

Statistics Canada says the number of operators under 55 years of age decreased from 265,495 to 152,015 between 1991 and 2011. At the same time, the number of older operators increased from 125,380 to 141,920.

"As the number of younger farmers continues to shrink, it is also reasonable to expect that significant amounts of farm assets will be bought by remaining farmers (increasing the number of larger farms) or may also be purchased by beginning farmers," says Beaulieu.

The 2011 Census of Agriculture found that more than 50 per cent of farms are operated by someone 55 years or older, compared to 37.7 per cent in 1991. Fewer than one out of 10 farms had an operator younger than 40, compared to about one in four in 1991.

These trends are the same in farms of different types and sizes in all provinces.

"The greater income stability provided by the supply management system for dairy, poultry and egg operations may be appealing enough for a young generation of operators to stay in agriculture and continue to operate the family farm," says Beaulieu. "Due mainly to the large sum of money capitalized in farm assets (especially for the production quota in dairy and poultry farms), the younger generation have challenges to raise significant capital to pay the older generation. For hog farms, price stability is definitely not a factor in attracting the younger generation. Starting up a hog farm is relatively easy for young operators, as they often enter the sector by setting up contracts with large integrator companies."

A 2012 paper by Larry Martin and Al Mussell for the George Morris Centre, a not-for-profit think tank, suggests that the issue of aging farmers may be somewhat overblown. It says that all Canadians are getting older as the baby boom generation ages and that life expectancy is rising, so farmers are working longer.

"With farm size growing and with land, quota, machinery and equipment all rising in price, the cost of entry into commercial agriculture as the sole or leading manager is extremely difficult for many young people to do," says the paper. Noting that "the vast majority of Canadian farms in all categories are owned and managed by families," it says, "For many farm families, the older generation has and can source capital and has experience. Their daughters and sons have energy and ideas. The generations work together to leverage each other's strengths. This means there are actually many young people in agriculture, many of whom have major management roles, but from a census perspective, the older generation is regarded as the operator.

"With the changes in farm size and structure that are occurring in agriculture, the census definition of farm operator is likely becoming quite meaningless."

Martin and Mussell add: "We are not seeing the demise of the 'family' farm or the rise of 'corporate' or 'factory' farms. Rather, today's farming technology allows for larger operations, many of which are structured as corporations for tax and succession reasons."

Another growing trend, says the Re/Max report, is "residential farmland use" including hobby/gentleman farmers or buyers who purchase farmland for recreational use or for tax advantages and income potential.

"Burying money in the ground simply makes sense for many farmland purchasers," says Ash. "The promise and potential of the land is something farmers have believed in for years. That sentiment will continue to support a positive outlook for Canadian farmland moving forward."

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  About the author, Jim Adair

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.
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