A bright future for farmers: Setting the stage to support the next generation
A bright future for farmers: Setting the stage to support the next generation
Forty percent of Canadian farm operators are expected to retire by 2033, leaving a potential workforce gap of 24,000. So why aren’t more people taking up the mantle and stepping into an industry with potentially plenty of prospects and job security?
One explanation is that young producers simply aren’t that interested in following in their parents’ and grandparents’ footsteps. Another is that farm succession isn’t as straightforward as it used to be.
Family farms are facing higher costs and increased competition. A lack of rural investment is also pushing more and more young people toward the higher standard of living cities offer.
There’s still hope for Canada’s family farms, but it will require a coordinated effort by the current and next generation of owners, funders, advisors, and all levels of government.
Key takeaways from this article include:
- Develop robust succession plans: Proactive planning is essential for smooth transitions in farm ownership.
- Increase automation: Investments made today can help maintain productivity, reduce labour demands, and save costs over the long term.
- Enhance educational investments: The next generation needs help managing high operational costs and adapting to advanced agricultural practices.
- Address rural infrastructure deficits: It’s time to close the rural/urban divide by improving connectivity and services to make rural areas viable for farmers.
Table of contents
- How we define the issue will affect how we find a solution
- Challenge 1: Getting started requires a significant capital investment
- Challenge 2: Farm sizes are changing, breaking ground on traditional farming now harder
- Challenge 3: Costs are continuing to rise, and the return on investment is inconsistent
- Challenge 4: Lacking support for rural and remote areas
- Carving out a fresh path forward for the next generation of farmers
An April 2023 report from RBC predicted that 40 percent of farm operators will retire over the next decade. It also suggested that 66 percent of operations don’t have a succession plan, and the resulting scarcity of talent will create a shortfall of 24,000 general farm, nursery, and greenhouse workers.
All three statistics are cause for worry in the agriculture industry. However, they don’t tell the full story.
Plenty of young farmers are waiting in the wings to take over the family farm. Finding interested successors isn’t the issue so much as the significant challenges that make farm ownership less appealing in the current environment.
While the average age of farm operators continues to climb in Canada, county fairs and tradeshows are filled with young farmers quietly learning the ropes as they have always done. And they’re usually surrounded by children, grandkids, nieces, and nephews.
If we are expecting a shortage of farm successors, it won’t be for lack of will or desire. More likely, it’s the table we’re setting for them that will force this generation to look for greener pastures.
Speaking with a few young farm operators, what are their worries for the next decade and beyond?
“We have more young people to take over our farms in Canada than we think. But we need to be realistic about the challenges they face.”
How we define the issue will affect how we find a solution
TopRBC produced their report in collaboration with BCG Centre for Canada’s Future and the Arrell Food Institute at the University of Guelph. It features several compelling facts and figures, including that:
- Forty percent of Canadian farm operators will retire by 2033, placing agriculture on the cusp of one of the biggest labour and leadership transitions in the country’s history.
- This will create a shortfall of 24,000 general farm, nursery, and greenhouse workers over the same period.
- Canada will need to increase automation and its pipeline of domestic farm workers to meet the nation’s medium and long-term goals. This will require a significant increase in education and research and development spending.
While he believes those figures are compelling, MNP’s senior vice president of Agriculture Services, Stuart Person worries they’re distracting from the more pressing challenges young farmers are facing.
“We have more young people to take over our farms in Canada than we think. But we need to be realistic about the challenges they face,” says Person. “The financial barriers to entry are extremely high, and the financial rewards of farming are not always lucrative — and that’s before factoring in the natural ebbs and flows from year to year.”
Person also points to the rising costs of production, tight margins, waning effectiveness of income support programs, and increased risk associated with running a farm business.
Moreover, many young would-be farmers have not seen any meaningful effort to invest in rural communities to address aging road and rail infrastructure, much less provide high-speed internet or mobile phone coverage.
All told, these shortfalls make doing business in these areas an even more expensive and undesirable place to live and do business.
“When succession plans rely on big sales, land is going to go to the highest bidder… and that isn’t going to be the smaller operations.”
Challenge 1: Getting started requires a significant capital investment
TopIan Chitwood is a fourth-generation farmer in Airdrie, Alberta. He, his brother, and his dad have their own operations but help each other out when needed. Living just minutes from Calgary, Chitwood has a second job because his farming income often isn’t enough to pay the bills, and urban sprawl is wreaking havoc on land prices.
The 2024 property assessment report out of the City of Calgary stated they will need to absorb 1,012 hectares of land over the next five years to meet housing needs as the local population continues to grow.
“We can't afford the land that we’d like to buy to expand,” says Chitwood. “Instead, it’s going to developers and investment companies.”
Many of Chitwood’s neighbours have opted to sell their land to the City of Calgary and move away. Both he and his brother are in their early 30s, and neither sees much changing for their operations in the next 10 years. He worries about how local land prices will continue to rise, hampering efforts to grow.
With the ongoing shift to corporate farm ownership, renting land may become the only option for smaller operations like Chitwood’s.
A similar story is playing out in the south of the province. Sean Stanford has been farming his own land near Lethbridge since 2004 and works as a mechanic in the offseason. He wants to be a full-time farmer but hasn’t been able to make that dream a reality yet. While he, his brother, and his dad all have separate operations, they share equipment and help each other out.
With so many farmers slated to retire, Stanford sees two possible futures. One is that more land will become available for operations like his to expand. More likely, it will just be another opportunity for the big farms to get even bigger.
“When succession plans rely on big sales, land is going to go to the highest bidder,” said Stanford. "And that isn’t going to be the smaller operations.
Stanford is surrounded by several large operations and says he always seems to be the last one on the list to learn about opportunities to rent or to buy. While he tries to keep in contact with his neighbours as much as possible, it doesn't seem to be helping.
“Starting a farm alone in the traditional sense is [perhaps] not even possible today.”
Challenge 2: Farm sizes are changing, breaking ground on traditional farming now harder
TopStatistics Canada’s 2021 Census of Agriculture revealed that operations with more than $2 million in profit now make up half of Canadian farms. The number of small and mid-sized farmers is shrinking.
As operator-owned and managed farms continue to transition, they’re challenged with extracting 30, 50, or more than 100 years of generational wealth without overburdening cash flow or triggering an unmanageable tax burden.
Farmers need the revenue from farm assets to fund their retirements and estate distributions. And the only way to get it is through selling to a large operator or receiving a massive financial contribution from the succeeding generation.
The start-up costs are almost unimaginable for anyone trying to take over a farm or who wants to start farming from scratch. They should be prepared to bring a significant amount of capital to the table.
Chelsea Sutherland broke down the costs of starting from scratch in an article for Sustainable Agricultural Innovation & Food. The average per acre land price in Saskatchewan was $1,943 in 2019. With principal and interest, Sutherland pegged the average cost per section at $1.4 million. According to Statistics Canada, the market value increased by 22.7 percent between 2016 and 2021.
Then there’s equipment, which Sutherland said would cost $334,105 annually to rent and $572,477 to buy used. She also estimated variable input costs of $303.91 per acre for canola and $174.42 per acre for wheat.
It’s worth noting that these calculations do not account for operating utilities like power, water, and fuel. Nor do they consider on-farm buildings or other common farming tools.
Sutherland concluded that even with top-end yields and high grain prices, the farm would find itself deep in the red for years.
"Starting a farm alone in the traditional sense is [perhaps] not even possible today,” says Sutherland.
For anyone looking for a small sliver of hope, she did note many examples of farmers starting small and finding success in niche markets and diversification.
MNP tax advisor Ryan Kehrig notes that this problem is only going to grow in the coming years. He believes that without significant capital upfront, anyone wanting to get into farming at the ground level will be laughed out of the bank.
Challenge 3: Costs are continuing to rise, and the return on investment is inconsistent
TopMargins have always been tight in agriculture, but they’re getting even tighter. The squeeze is coming from all directions: increased input costs, unpredictable markets, generationally high inflation, and the highest borrowing costs in more than a decade.
According to Statistics Canada, input costs increased by 4.5 percent in the first quarter of 2022 compared to 2021. April 2022 alone saw a nearly 20 percent increase compared to April 2021. October increases from 2021 to 2022 were 10.1 percent.
Thankfully those costs have a chance of going back down. Those related to necessary investments like technology, building infrastructure, and machinery are far less sensitive to market forces than feed, fuel, and fertilizer. When they go up, they tend to stay up. Even if higher beef, grain, or other output prices allow operators to break even on inputs, the net impact on the cost of production is significant, making farming far less profitable.
Farmers are also feeling disproportionate impacts of carbon taxes. Agriculture is energy-intensive, and the current taxation scheme will continue to increase the costs related to that energy every year through 2030.
Collectively, these issues add a whole new layer of risk for Canadian producers while simultaneously eating away at the potential return on investment.
Only 45.6 percent of rural households have access to broadband internet compared to 98.6 percent of urban households.
Challenge 4: Lacking support for rural and remote areas
TopThe RBC report is also front of mind for municipal organizations. Agricultural investments mean municipal revenue for things like policing, telecommunications, healthcare, and education. These services are a constant challenge to maintain in rural communities where farmers and their families work and live.
Governments offer varying levels of support for farmers, but the current programs often don’t go far enough to prop up the industry or support rural and remote communities.
Saskatchewan has signed onto the federal Canadian Agricultural Partnership, which became the Sustainable Canadian Agricultural Partnership in April 2023. The federal government has promised an additional $3.5 billion through the program through March 2028, with more than 85 percent dedicated to cost-sharing projects and federal programs/activities.
Even still, municipalities are struggling to keep up with climbing infrastructure costs, including internet and telecommunication services and upkeep of their existing inventory.
“We don’t get enough support in rural Saskatchewan,” says Ray Orb, President of the Saskatchewan Association of Rural Municipalities (SARM) and Reeve of the Rural Municipality (RM) of Cupar. “Even just the engineering costs for a road or a bridge — it’s getting to the point where rural municipalities can’t afford it. The federal government needs to realize that, and so does the province.”
There are 62,101 km of rural highway and over half a million kilometres of arterial, collector, and local roads throughout rural Canada. These roads require maintenance and service, a small example of infrastructure spending that needs to be raised and managed through municipal spending.
According to the Canadian Radio-television and Telecommunications Commission, 88.8 percent of major roads and highways have LTE coverage in Canada. Access to rural internet has been a consistent topic for discussion over the years. Only 45.6 percent of rural households have access to broadband internet compared to 98.6 percent of urban households.
It takes funding at all levels of government to address this problem on behalf of rural communities.
The outgoing generation should be prepared to financially support their successors as they inherit the family farm.
Carving out a fresh path forward for the next generation of farmers
TopStep 1: Plan early for succession
Creating successful succession plans is going to be the most important step in ensuring continuity from generation to generation — and those discussions must happen as early as possible.
Agriculture business advisor, Trevor MacLean says it’s imperative the incoming generation understand the business before they take over. They need to clearly understand the pros, cons and different angles of decision-making. And they need to be comfortable with managing all the risks involved in running the business.
With so many financial barriers keeping young people out of farming, the outgoing generation should be prepared to financially support their successors as they inherit the family farm.
"If the farm can afford it and there's a good financial plan in place between the successors and the new generation, that support could make all the difference. But there are risks, the terms of any financial assistance must be well defined and well-thought through,” said McLean.
He adds that strong, clear communication and putting it all down on paper with obligations and family and business needs is critical as families move forward from one generation to the other. Those plans must also change with the ebb and flow of changing legislation and tax needs, but there’s too much at risk for families not to create some sort of plan.
“[Outgoing farmers] can’t hold the farm books in exile anymore.”
An impartial advisor, like MacLean, can help start, maintain, and finish these kinds of conversations. They can often see things clearer and take a more holistic view of things as a family would. Where family members have their own biases and perspectives, advisors are focused on what's viable and best for the business.
Lenders need to change their approach first to challenge their assumptions on what are good, bad, or low-risk clients.
Step 2: Lenders need to take a fresh approach
Lenders need to change their approach first to challenge their assumptions on what are good, bad, or low-risk clients. They need to base lending decisions on more than just what assets clients have, such as the assurances and insurance in place to shore up their finances in the event of a potential crash.
“I see it on the other side where it was probably a low risk for a lender to get behind somebody but didn’t because they didn’t like the collateral that was available,” says Person. “The forecasted risk scenario was much different than it realistically would have been.”
Lenders need to base their decisions on good financial information, but Person sees this overcautious mindset stonewall viable farm opportunities time and time again. He says it’s frustrating as a business advisor because it devalues what he and his team can do for their clients.
Whether they’ve been in the business for two years or 20 years, farmers know to surround themselves with good people, from agronomists to equipment specialists to legal professionals. Many would benefit from adding trustworthy business advisors to that list as a critical resource to help them reach their goals.
Financial problems are the biggest source of stress and mental health concerns in the agriculture industry. Improving financial literacy across the sector and injecting strong financial planning into an operation can save farmers and their families.
Getting the family involved, talking about the financial challenges of the farm, and finding help with succession planning, are all ways farmers can manage the stress of passing down the farm to the next generation, said MacLean. Farmers do not have to carry that burden on their own anymore. Farming is changing and what does the future look like for the success of that family farm?
“Talk about it. Because it is risky. It is going to take multiple stakeholders to figure out what the new model for agriculture looks like going forward.”
“It would be nice to have a certification that would say I’m capable of operating a combine, tractor, or sprayer.”
Step 3: Legislators need to prioritize initiatives to ensure family farms remain viable
Orb said SARM has been lobbying the provincial government for more training programs but feels he’s fighting an uphill battle. While there have been efforts, uptake of previous funding initiatives has fallen short of expectations, making him feel less confident that this will remain a priority for legislators.
Still, it’s worth questioning the lack of engagement. One explanation is there’s been a lack of interest or need. Or perhaps the right people simply aren’t aware these opportunities are even available to them.
Training would go a long way to build farmers’ confidence and remove the barriers to entry in a costly and increasingly complex profession. Farms are bigger than ever, and so is the machinery needed to run them.
“A lot of farmers now have large, expensive machinery that they don't want people operating without experience said Orb. “It would be nice to have a certification that would say I’m capable of operating a combine, tractor, or sprayer.”
The Government of Canada has extended its Agri-Food Pilot through 2025. The program is attempting to create a pathway for newcomers and temporary foreign workers to fill labour shortages in the agrifood sectors with a specific emphasis on work experience and language skills. If the program hits the maximum threshold of 2,750 applicants each year, it could help create a pipeline of 27,500 new labourers working in specific agri-food sector jobs by 2030.
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Step 4: Education is key
The urban and rural divides are not helping when it comes to barriers to entry support for farmers, said MacLean. And this issue looks different from one community to the other. Unfortunately, he says they're not working harmoniously.
When urban money is flowing into rural communities, it's causing conflict. More discussion needs to happen to bridge that urban/rural divide so everyone understands the importance of farming practices and the impact they can have on urban areas.
"There are certain practices when we talk about sustainability. You have to talk about things like manure application on farmland. Yes, it's stinky and it's dirty, there is no way around it. However, it is part of that recycling process.”
Whether it’s providing this bridge to people outside the farming sector through community news and advertising, figuring out how to get agricultural programs into secondary schools as early as possible, or educating within the industry to promote financial and tax literacy, focusing on these different forms of agricultural education could provide the answer to many issues.
“We're a massive contributor economically to the country, but we're also a massive educator of the general public as well,” said MacLean. “Agriculture needs to do a better job of finding that bridge in what we do to what the general public and government perceive we do.”
The more people know about agriculture, the more everyone, both in and outside the industry, will see how important it is. Finding ways to support educational opportunities and tell the story of Canadian farmers should be the focus for both large and small organizations across Canada. Farmers and agriculture industry insiders are all in this together so helping one helps the other, especially when it comes to keeping agriculture strong and viable in rural Canada.
Stuart Person CPA, CA
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