Are Canada’s mid-sized farms heading in the same direction as the dinosaurs? That’s not exactly what a recent analysis by think-tank Agri-Food Economic Systems is predicting, but there’s no question it wants to raise some doubts before you grow your own farm any bigger.
Large farms are booming in Canada, and they’re doing that mainly by buying up the country’s small and especially its medium-sized farms.
They’re good at it too, and the trend to very large farms is accelerating.
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The days of a one-parcel, 100-acre family farm are long past. As farm operations become larger and more sophisticated, so…
Is that a good thing or a bad thing? Is it progress, or are we as a country going to regret it? It turns out there’s plenty of evidence on both sides.
And maybe it doesn’t matter what we think. Maybe it’s inevitable anyway. Given that the number of farms has been declining for decades, if we have a relatively stable land base, the average farm size has got to go up.
“Some people would say that’s what we call progress,” says Al Mussell, research lead with Agri-Food Economic Systems and co-author of the analysis. “You’ve got people that over time have been leaving the farm to work in urban jobs and deploying their skills there, so there is a smaller proportion of the population that is involved in farm work … that’s a division in labour that most developed countries have gone through.”
Farming has changed, and so has the place where farming occurs.
“We have rural institutions and business models etc. that were dependent upon people living in the countryside and things working in a particular way,” Mussell says. “When you’re confronted with big changes over time, it begins to upset a lot of that order.
“People can say, well look, disruptive change can be good,” he says. “In many cases that’s probably right. I’m not so sure about this one.”
A different model of growth
Considering that most of Canada’s farms are still family owned, regardless of size, a primary driver for expansion is to accommodate more family members who want to make a living from farming, as in the preceding story. That’s a trend that isn’t new. But the growth model is.
“You’ve got farm operators with multiple younger generations that want to farm, and in order to meet the aspirations of that younger generation, the farm has to acquire more land to set younger people up,” says Mussell.
“In our essentially fixed arable land base, in order for that to happen, somebody has to sell and exit. That’s the organic growth model; we call it step-by-step, where over time, the little farms become middle-sized farms, and the middle-sized farms become big farms, and big farms become very big farms.”
The direction seems clear. The increase in average farm size in Canada is explained almost totally by how large farms are more and more quickly gobbling up mid-sized farms.
So, what does that mean for the future of the family farm in Canada, especially in the small- and medium-sized categories?
What’s driving farms to get bigger?
First, Mussell wants to be clear. There’s nothing nefarious at play, he says. Multinational corporations, pension funds, and tech billionaires are not planning to buy up all the farmland to amalgamate into massive farms run by robots.
Instead, large and very large farms — like the rest of agriculture — are almost entirely family businesses.
“In fact, if you are a very large farm, if you were to sit down with somebody who was helping with business strategies, they’d probably say what you’ve got going for you is the economy of size and if you want to be successful you need to leverage it,” Mussell says. “That’s efficiency, that’s competitiveness — a whole lot of things we’re aspiring to do — I think we should maybe make sure that that’s acknowledged.”
As well, expectations with each generation are changing in terms of lifestyle and career options, so that has a push-pull effect on the larger farms too.
Yes, farms are bringing new family members into the fold, Mussell says. But, he adds, “keep in mind that we’ve got exceptionally well-qualified people on farms today. They have options, so if you have a son or daughter that could go to medical or law school, or another professional career but instead, they want to farm, you’re not going to offer them a farming prospect and have them make $35,000 a year. They’re going to want to have a higher income level. Well, that may push the farm to be quite a bit larger over time. That’s this treadmill that we work with.”
Who’s most profitable?
Here is the question, though. Since larger farms are more efficient and have economies of scale, they can’t help but make more money, right? Well, not always.
Another recent report by the Canadian Centre for Policy Alternatives (CCPA) examined per-acre gross revenues and net cash income for different sizes of grain and oilseed farms. As you might expect, it found per-acre revenues generally increase as farms get larger.
But there’s a “but.” When you switch from gross to net income, the report, called Concentration Matters, says the data gets more ambiguous. In Saskatchewan and Manitoba, for instance, net income per acre increases as farms get larger, but in Alberta the trendline is flat.
Why? Perhaps the answer lies in whether large farms are actually more efficient.
One analysis — admittedly from Saskatchewan only and from a single year — showed that of the province’s large farms (10,000 acres or more), increases in gross revenue and net incomes were largely a function of increased input use. But the ratio of dollars in to dollars out was roughly the same across all farm sizes: $1.30 of output per $1 of inputs.
This suggests that larger farms are not inherently more productive, but are simply spending more.
The CCPA report concludes: “The evidence provided here raises questions … Policy-makers need to question the assumption that bigger is better, more productive, more profitable, or more efficient.”
What happens if there aren’t enough mid-sized farms?
CCPA co-author Andre Magnan of the University of Regina believes a healthy farm sector needs room for farms of all sizes, and he’s also not predicting the end of the family farm anytime soon.
“While I don’t think having some very large farms is the death knell for the family farm,” Magnan says,“we would really hope to be able to see 20 years down the road that it’s still possible to be successful at different scales.”
The toughest outlook may be for mid-sized farms that are big enough to need a full-time farmer, but not big enough to compete with the same economies of scale of larger farms.
“They should be able to deliver more or less a full-time income or a reasonable level of household income but they’re in sharp decline,” Mussell says.
It begs the question, though. What happens when there aren’t enough mid-sized farms to buy the used equipment that large farms trade in on new models?
“At some point we will cross a threshold,” Mussell says. “The demographics have changed so much, that will influence the investments that large farms can make in new equipment.”
Not just about the economics
There’s more than economics at play. A continuing trend towards larger farms could also have societal and environmental implications resulting from the concentration of land ownership in fewer and fewer hands, according to the CCPA report.
The report analyzed ownership concentration in the Prairie provinces where 70 per cent of Canada’s agricultural land is situated. In Saskatchewan’s 2016 census, eight per cent of farms operated and controlled 38 per cent of the farmland. The top two per cent farmed 18 per cent of the land.
The picture is similar in Manitoba, where four per cent of larger farms operate on 24 per cent of available farmland, and in Alberta where six per cent of farmers control 40 per cent of land.
In 20 years, the report projects, large farms over 5,000 acres could operate 50 to 60 per cent of Prairie farmland.
“What happens when our food producing resource, which is land, is more and more concentrated in a smaller number of hands?” Magnan asks. “We believe that there is some risk there for society at large.”
Reversing the trend
But if farmers believe the most competitive, most sustainable path forward is larger farms, does it matter what the academics think? Magnan thinks it does. “The danger there is when it comes to the point where only the largest, well-capitalized operations are able to bid or purchase more land.”
Is there any way to stop the trend towards larger farms getting bigger at the expense of medium-sized farms? And is that really what we should do?
“We think there needs to be a serious policy discussion about these kinds of trends,” Magnan says. “We believe there are a number of policy levers that could be studied such as tax policy and farm programs that help newer farmers get established and attract people from outside.”
Mussell’s think-tank also highlights elements that could have an impact, such as payment caps on business risk management programs like AgriStability, or municipal regulations around permits to buy and develop land.
Mussell admits, though, there aren’t a lot of options that won’t potentially cause more problems than they solve. In other words, competition among farmers may not resolve this issue, but if it gets it wrong, government policy could be disastrous.
“I’m not sure we necessarily can ignore it,” Mussell says. “But I also don’t know what we can do about it.”
