As owner and operator of Shifting Blooms Flower Farm, the flower farmer, blogger and author uses the winter months to prepare for a successful growing season.

In December, Raney was looking into wedding trends for 2025, scouring Pinterest for arrangement ideas and colour schemes she can sow into her upcoming flower crop. A rich chocolate brown called Mocha Mousse is the colour of 2025, according to the Pantone Color Institute, so Raney has been looking into incorporating brown tones into her creations. By April, her first plants in the greenhouse were showing signs of bright green life and her perennials were popping up on her Clavet, Sask., farm.

Raney’s bread and butter for her 2025 sales season is her 3,600-sq.-ft. garden and 256 square feet of raised beds of flowers and greenery which she’ll use to supply up to 20 weddings and 10 local markets.

Her first spring crop amounts to 80 per cent of her total plant growth, she said. Successive planting of later blooms and replacement seeding goes until mid-July and make up the other 20 per cent of her inventory that lasts until October.

It’s a risky job. So many factors are out of her control, and she tries to maintain enough inventory throughout the summer and into the fall.

On flowers alone, Raney says she’ll spend $1,000 annually on seed and bulbs, but that doesn’t include the cost of water, trays and other flower growing necessities. In 2024, Raney spent $3,000 to supplement her stock, mostly done on an as-needed basis, like when planting plans don’t work out. And there are some flowers Raney plans to buy from other florists, including sunflowers and dahlias.

In 2016, Raney started the blog that would provide the impetus for launching her business in 2021. She says she concentrates on growing a little bit well instead of trying to spread herself too thin. 

“The first two years, you need to plant a bit of everything, just to figure out what you’re good at, what you like and what customers like. But after year three, year four, you’re really trying to narrow down the things that make sense and get good at planting just those crops.”

And if something doesn’t sell Raney has a use for it.

“If my stuff doesn’t sell, I’ve used it in creative ways — written about it and made a video about it. I will probably see that profit on the other side of the business,” she says.

Even her trials and errors have not been a waste. Raney has learned to use them to her advantage. For example, she took what she learned from working with cool flowers and hearty annuals (flowers that can survive in colder zones) and put it in an e-book about how to grow a frost-proof garden. 

“I killed a lot of plants to try to figure out how we could essentially garden and plant in April so that we have a whole bunch of flowers in July. If I didn’t have that blog and YouTube part of the business, that would have been a lot of flowers to waste.”

Stay tuned for the next instalment in this series as we follow Kristen Raney’s business “decision trail” throughout the spring, summer and fall.

The post The butterfly effect of floral planning appeared first on Country Guide.

About 13 years old, John Pruim was on a family road trip back to the province where he had spent his early years when the taste of farm fresh ice cream stirred something inside him.

“I’ve always loved ice cream and taking the milk from your own cows and making it into ice cream — I just loved that idea,” he says.

“So, it became a dream at that point.”

Many years later he got serious about making that dream a reality.

After moving away from the family dairy near Osler, Sask., completing an agriculture degree at the University of Guelph, and spending some time travelling abroad, Pruim decided to enrol in an ice cream and gelato-making course in Italy.

“I could have looked it up online, but anybody can look it up online — it doesn’t necessarily mean you’re going to make a good product,” he says. “If I was going to do it, I wanted to learn how to do it properly.”

After completing the course in 2020, he came back to Saskatchewan and started to look for the right location, knowing he wanted the business to be more than just a retail shop but also an agri-tourism destination.

With the help and support of his parents, he homed in on a location just off Highway 11 near Warman, Sask., a piece of land with a large barn on it, which he began to outfit into its current processing, retail and storage space.

Twin Peaks Creamery opened its doors in spring 2023 and Pruim’s dream became a reality.

Support and a little luck

The first year and a half of operating have perhaps felt a bit like a dream for Pruim, with strong demand, quickly expanding product lines, and retail and wholesale opportunities.

But Pruim is also very open about how much work has gone on behind the scenes to make this dream a hard-earned reality and how grateful he is for the support — and lucky breaks — he had along the way.

Early on in the process, he realized he was lucky that he wasn’t the first business of this type in the province. Sunnyside Creamery, another dairy agri-tourism business located north of Saskatoon on Highway 12, cleared a pathway for him, he says.

“They did a lot of the legwork with SaskMilk and the province back when they started up. They cleared a lot of the red tape.”

SaskMilk, which implements programs for the provincial dairy industry, was also very supportive of the Twin Peaks venture, says Pruim, who is a licensed milk truck driver.

“They made it really easy to pick up my own milk and process it, and get the licenses to do everything,” he says. “They haven’t made it unnecessarily hard to do any of this stuff.”

He says he also felt supported by the Saskatchewan Health Authority, the province’s food safety body, which has guided him through regulation processes since early in his journey.

“They’ve been a huge help.”

And he says he is lucky to have the support of his parents, Art and Elaine Pruim, who operate Plum Blossom Farms, a dairy farm in Osler, Sask., and who are investors, owners and shareholders in the Twin Peaks business.

“Mom and Dad financed the building, so they built the actual shell. I’ve done everything inside, with a little help from the bank.”

Although the creamery is designed to help add value the family dairy farm, getting its products to consumers in new and novel ways and forms, the creamery is structured as an entirely separate business, Pruim says.

“It just works better long term,” he says, adding his brother is currently running the family farm. “The idea isn’t that it gets paired up.”

Pruim says he also caught a lucky break when it came to acquiring equipment for his venture, as he began his search for equipment during the pandemic years, when many other ventures were going out of business. Because of this, he was able to acquire some of his big pieces, including an ice cream-making machine, a display case, and even the ice cream pasteurizer, at a steep discount.

He did have to buy a few items new, like a milk fat testing machine, homogenizer and milk receiving tank, but the vast majority of his equipment was purchased second-hand or at auctions, he says.

“I figured I saved probably about $300,000 to 350,000 just on finding used equipment.”

Entrepreneurialism in the blood

Pruim says one of the greatest challenges he faced was having to learn so much, so quickly.

“We were flying by the seat of our pants a little bit, because we’d never done processing before. We’d never done retail before.”

But challenging himself like this made him realize how much he was actually capable of.

Growing up on a dairy farm, he says he learned early on how to work hard and be resourceful.

“You get taught how to work, and you just know what to look for to find stuff.”

This farm-bred resourcefulness also compelled him to arm himself with as much information as possible along his journey and leverage the experience and expertise of others.

For example, as he was setting up the business, he decided to take a pasteurization course in Manitoba to sharpen his skills. He also spent time touring milk plants in Ontario, B.C. and Alberta in the years before Twin Peaks was launched.

“I picked a lot of brains on why they built it that way, or what they would change and whatnot.”

Throughout all this often tiring work, he was guided by a strong vision: he wanted to start something of his own, creating a product he loved, using ingredients from his own family farm.

“I figured out probably five to 10 years ago that I was getting tired of working for people. I guess I’ve been blessed with the entrepreneurial thing,” he says, adding both his dad and grandpa ran their own businesses.

“It’s in the blood.”

A bright and busy future

Although Pruim can now safely say his dream has become a reality, there isn’t much time to celebrate.

After two summers in business, he says demand for the existing product is growing and he’s figuring out how to expand his product line and reach.

This is exemplified by the fact that his original 15-litre pasteurizer is already tapped out. It will be replaced by a 500-litre machine, which will allow him to produce and create more to serve growing demand. He plans to start offering milk, cream, eggnog and chocolate milk in the near future, and making ice cream cakes.

“I think that (ice cream cakes) is going to take on a life of its own, which kinda scares me a little bit,” he laughs.

He will also continue to run the business as usual, as well as host events and tours at the space and he has plans to continue to expand the availability of his products. His ice cream is already available in two retail locations in Warman, Sask., and most recently at the Children’s Hospital café in Saskatoon.

“That’s gone incredibly well since they started that up in July.”

He says he’s also focused on wholesale expansion, which will be more cost effective with his new pasteurizer.

“It’s going to make the option of selling four-litre and eleven-litre pails just a little bit more palatable for people pricewise,” he says.

“Right now, the cost is absolutely insane just because of labour and materials — especially on the labour side.”

Advice for other ventures

If other producers are considering expanding their businesses through value-added ventures, Pruim’s advice is to do it — with a few caveats.

First of all, he believes it’s critical to have a solid, compelling product.

In his case, that’s the ice cream, which is unique for a couple of reasons. Firstly, it has a higher milk fat content than traditional ice creams (at about 13%, it’s comparable to Häagen-Dazs).

Secondly, it’s more of a hybrid between traditional ice cream, which is harder and colder in the mouth, and gelato, which is softer and meltier.

He also uses all natural ingredients for flavours.

“When you see a pumpkin pie in the display case or a blueberry cheesecake, that bright orange or bright purple is the colour I got out of the fruit. I think that makes a world of difference.”

He also believes it’s critical for business owners to be passionate about their product.

“Finding a route to diversify is not hard. But if you’re just in it for the money, I don’t think it’s going to be as successful. It just turns out better when people can see that you actually care about what you’re making.”

This advice is personal, as he says his strong belief in his product and dream has carried him through 16-hour workdays, five months of the year (winter months are a bit slower, but not much).

Overall, Pruim believes there’s a bright future for agri-tourism ventures in the province, as he’s learned since opening his doors that people are increasingly seeking a more direct connection to their food and the farms that produce it.

“The amount of people that ask questions, want to look through the window and see how the process works… the knowledge that people want is just incredible. They’re so disconnected now.”

“If you can find a way to show people where the food’s coming from, how it’s grown, that’s much needed.”

And when those people ask him what type of Twin Peaks ice cream to try first, he says it always comes back to the blueberry cheesecake.

“It’s the flavour that started off this whole idea. That’s always been one of my favourites. And I just love blueberries.”

Growing opportunities for the next generation

University student Adrienne van Staveren has visited Twin Peaks several times, in part because she has a special connection to the product.

As a part-time employee at Plum Blossom Farms (full-time during the summers), she is part of the ice cream value chain.

The 20-year-old, who grew on up on a grain farm in Griffin, Sask, is also inspired by the Twin Peaks’ story.

“I love seeing other young people entering the industry,” she says.

Van Staveren has her own plans to be part of the agriculture industry’s bright future.

In her second year of an agriculture degree at the University of Saskatchewan (U of S), majoring in animal bioscience, she hopes to go on to veterinary school to work with large farm animals.

This has long been a dream for her, since she was a young girl building her collection of farm pets, which included cats, dogs, rabbits and hamsters.

“I’ve just always loved animals. I was always asking my parents for more animals,” she says.

She also loved the cows at her uncle’s farm, where he often allowed her to help out.

It was this love of cows that drove her to seek summer work on the Pruim family farm, a job which has continued into the school year.

It is also this love of the animals that helps her wake up at the crack of dawn, every second weekend, to start her 4:00 AM shift at the dairy. She then spends the next eight or nine hours milking, bedding and feeding cows, takes care of calves and pigs, and doing general barn chores – and she enjoys every minute of it, she says.

“There’s always something going on there. It’s a very busy, but very interesting place to work. It’s easy to get up for something that you want to do.”

She says working at the dairy barn has also been a great learning opportunity.

“I ask tons of questions. I’ve learned tons about our dairy, but also other dairies ­­— there’s lots in that area.”

She also hopes her experience at Plum Blossom will increase her chances of getting into veterinary school (the U of S vet college admits only 88 students each year).

“I’ve learned so much about the industry. It’s been a really good opportunity.”

She was also happy to see the farm’s expansion into value-added products, with the launch of Twin Peaks Creamery, which will strengthen the future of the industry and add more jobs for her generation.

“When you work together, even if you come from different places, we always have one thing in common, which is a passion for agriculture.”

The post Sask. creamery turns ice cream dream into reality appeared first on Country Guide.

Too often it seems we never hear the words “disruptor” and “Canadian agriculture” used in the same sentence. When we’re thinking about hot new business concepts like disruption, Silicon Valley is more likely to come to mind with all of its tech businesses and rule-breaking entrepreneurs. And what may be least likely to be thought of is a seemingly sedate industry like agriculture, or especially one of its quiet corners, like dairy.

Yet if what we mean by a disruptor is this — someone who re-imagines how things get done in the business world and who gets the money for doing it — then here’s a farm a half hour north of Montreal at Ste-Anne-des-Plaines that is asking us to rethink just how far Canadian agriculture can go.

If this isn’t disruption, nothing is.

The farm we’re talking about is called Ferme Vachalê/Lait Charbonneau, and it dates way back to 1634 when Olivier Charbonneau was the first European to farm what is now the island of Laval.

Today, incredibly, this family farm is in its 12th generation — a generation that includes co-owner siblings Luc, Julie and Mathieu along with co-managers Jocelyne Prud’homme and Marie-Andrée Raiche (married to Luc and Mathieu, respectively). There are also the 10 kids in the up-and-coming 13th generation, plus several farm and store employees. And, of course, the grandparents.

Combined, they milk 160 cows two times a day with eight double automatic take-off milkers, 16 cows at a time in barn space they’ve expanded twice since 2009, with each addition big enough to hold an additional 40 cows.

They also grow 435 acres of forages, cereals, corn and soybean in an eco-responsible business that makes every effort to reduce their environmental footprint. For example, they find ways to limit diesel and pesticide use, their feeding program reduces methane output from the cows, they use cover crops and windbreaks to build soil health, and they use cropping systems like direct seeding to encourage earthworms and soil structure.

The farm philosophy is based on their mother’s term “reasonable farming” (or, as she would say, “l’agriculture raisonable”), which means that Mother Nature does a pretty good job on her own; we just have to help her along by doing “reasonable” things, i.e. things that on that particular region and farm will complement her natural forces and cycles.

Thinking beyond

Their business management, by contrast, is creating its own sense of direction, unafraid to go beyond the expected as the Charbonneaus become disruptors, taking charge of slim profit margins by going vertical and by processing milk on-farm to supply their retail dairy store, Lait Charbonneau.

Launched in 2022, the storefront and milk processing plant are just steps away from the main farm.

In a way, it’s a back-to-the-future concept for the family. Until 1972 the Charbonneaus handled the evening milk run themselves, delivering milk door-to-door in the community.

But if the concept isn’t new, the reasons driving it are. Or, at least, they’re more intense.

When we meet, Marie-Andrée Raiche clicks through a list of those reasons.
“The farm economy is difficult,” says Raiche. “Input costs are too high. We want to receive a fair return, not the crumbs we do for the work we do while everyone else down the supply chain is making money.

“We needed some leverage, a way to control our own business costs and profits. We have 10 kids coming in the next generation. And since the end of our milk run, we always wanted to have the opportunity to be that contact point with customers again.”

They also knew they wanted to be part of the agro-tourism scene (“because let’s be honest: that’s where the money is,” says Raiche) and that the business would have to be completely transparent about how it operates and how products are made.”

Finding the right advice

The family has many ideas for future growth, but they pace themselves and work in stages. “We need to be successful quickly because there are always bills to be paid,” Raiche jokes, “but at what speed? You can be successful in 10 years or you can be successful in one — but you need to be able to deliver. So, yes, you can ‘go fast and break things’, but to a point. For example, the quantity of milk we’re producing every day means we can deliver, but we need to grow at a reasonable pace or we’ll kill ourselves with work.”

They visited about 15 other dairies when they were in the research stage of their store project — and everyone had advice to share. “The thing about advice,” says Raiche, “is that it’s that person’s experience, something they’ve lived through and so maybe that piece of advice helped them. During our visits, most owners were generous and shared a lot of advice. Some of it was not for us. Some of it we brushed off and shouldn’t have. Some of it turned out to be very helpful. But what advice is good for you always depends on what you want to accomplish, what kind of image you want to portray, what kind of customer you want to attract.”

They got good marketing advice too. Projecting the right image can be a challenge, they found. “We struggle sometimes with figuring out how to showcase our products without being too showy, too market-y, too ‘not us’,” says Raiche. “There’s competition out there and we think our products are the best, but … if it’s not marketed in the right way to those who don’t know our products, it can be the best product in the world, but no one will be interested in trying it to find out.”

Raiche, meanwhile, has emerged from the process with some thoughts of her own. Her best business advice? “Follow your heart. Listen to your partners, your team, your customers. When you’re overtired, take a break, step back. It’s not easy, but you need to pace yourself and understand that you’re only human. And build big! Everyone said we would have to expand about two years after opening and it hasn’t even been two and we already know that we’re going to have to get bigger.”

In 10 years they want to be able to process all milk on-farm into products for the store. Thanks to the advice they received while visiting other dairies during the planning stage (build big!), they “built with the intention to destroy” — meaning that all the plumbing, electrical, etc. in the processing section of the building were designed to be easily added to or modified. The store will help pay for the new barn addition in 2025 and those cows will help finance the processing facility’s growth.

“It’s very exciting — especially when you see the face of a customer who’s tasting your product for the first time and their eyes roll back in their head,” Raiche beams. “To see the results of all your efforts, that’s priceless.”

Making the decision

There’s a big unanswered question, however. How does a family come to big decisions like these, with everyone on the same page? “We all sat down with some beer and wine and a legal pad and a pen, and we listed everything everyone wanted,” Raiche says.

But she also agrees there’s more to it than that. “We had to deal with our expectations — and eventual client expectations — and so we had to also work out, okay: how are we going to realistically do this? Because we are five people with five visions for the business.”

They knew they wanted to be as transparent as possible so customers feel confident in what they do on-farm and in the store, so it turned out one thing they all immediately agreed on was placing a window in the store that looks into the processing room so customers could see how the products are made.

The farm also hosts hundreds of Quebecers each year at the annual Portes ouvertes (“open house”) event in September, organized by the province’s agricultural union. “This year, half the village is reserved for event parking (the farm is metres away from town limits) and we’ll have 50 people working here that day,” Raiche says proudly.

“Before our store opened, the average length of a visit was about an hour and a half. Now it’s three to four hours.”

Each co-owner and co-manager is responsible for a part of the business, but major decisions or big purchases are made as a team. “Someone can’t just go out and buy a $200,000 tractor if they feel like it,” says Raiche.

“There must be boundaries and respect for each person’s area of responsibility.” Luc manages crops and machinery; Julie handles financial tasks and manages the herd; and Mathieu takes care of human resources. Raiche manages the store and its 12 employees, and Jocelyne develops and makes most of the products and monitors quality control.

The grandparents are still involved as is Raiche’s 15-year-old daughter, who is interested in taking over someday and works in the (delicious!) on-site food truck for the summer.

But a business is a business even if — sometimes especially if — you’re working with family, so setting up roles and responsibilities helped avoid confusion and frustration.

“Our biggest hurdle was figuring out who was going to do what. We all want to contribute to the business and do our best,” says Raiche. “But we all have different fields of interest and expertise, and also different ways of thinking. One of the first things we did was make a list of what each person was responsible for to ensure that work wasn’t done twice, or something didn’t get done because it was assumed someone else would do it.”

Raiche’s face brightens as she adds: “It’s not a secret, okay … It’s called talking to each other. You know, communicating.” Compared to previous generations, she thinks more people are discovering how to listen and communicate, and that it takes all kinds of people to run a business. “Even when you are co-owners, some people are better at managing the day-to-day, others are more visionary. But you can’t just be a visionary and forget the day-to-day. We need to use everyone’s skills to be able to function. It takes a variety of perspectives to make a healthy whole.”

And remember there will be bumps. “It’s a business, so there’s always something to be anxious or worried about,” concedes Raiche. “My advice is to stay calm … There’s always a solution. You might not see it at first, but there is one.

– This article was originally published in the October 2023 issue of Country Guide.

The post Summer Series: How to get disruptive appeared first on Country Guide.

Bill C-208, a private member’s bill spearheaded by western Manitoba Conservative MP Larry Maguire with amendments to the federal Income Tax Act, cleared the House of Commons in mid-May and Senate in late June. On June 29, it got royal assent.

However, the federal finance department on June 30 pointed out that C-208 as passed “does not include an application date.”

The Liberal-led government said June 30 it’s “committed to facilitating genuine intergenerational share transfers, while preventing tax avoidance that undermines the equity of Canada’s tax system.”

Thus, the government said, it proposes to introduce separate legislation to “clarify” that C-208’s amendments apply at the beginning of the next tax year, starting Jan. 1, 2022.

C-208’s tax law amendments are meant to exclude the sales of farms and other small businesses to adult children or grandchildren from current anti-avoidance rules.

Under pre-C-208 tax law, Maguire said in May, “when a person sells their small business or farm to a family member, the difference between the sale price and the original purchase price is considered a dividend.”

But if the business instead goes to a non-family member, the sale is deemed a capital gain, which is taxed at a lower rate and allows sellers to use their lifetime capital gains exemption, he said.

During debate on C-208 last fall, the Liberals cautioned that Maguire’s bill, as Ontario MP Tony Van Bynen put it, “seeks to amend two of the Income Tax Act’s most important and complex anti-avoidance rules.”

Those rules, he said, are meant to apply when an individual sells shares of a corporation to another corporation that is linked to the same individual — for example, through a family member.

When shares of a Canadian corporation are sold to such a “linked” corporation, the pre-C-208 rules deem that in certain circumstances, the seller has received a taxable dividend from the linked corporation, rather than a capital gain.

The rule, he said, is meant to ensure taxpayers “cannot use linked corporations to, in effect, remove earnings from their corporations, using a sale as a basis to do so.”

But the Conservatives at the time noted C-208 requires that a family member buying such shares of a farm or small business must not sell them for at least 60 months for any reason, other than “by reason of death.”

To curb tax evasion, they said, C-208’s provisions would not apply to such a buyer who sells before that five-year period ends.

‘Intentions clear’

The Canadian Federation of Agriculture, in a separate statement Friday, took the finance department’s June 30 announcement to mean the government “will likely be making amendments in order to close potential tax loopholes.”

The CFA said its “primary concern” is that C-208’s changes to the treatment of intergenerational farm transfers “must be made clearly accessible as quickly as possible, as Parliament made its intentions clear through the passage of the bill.”

“In our talks with the accounting community, this delay, and the uncertainty around exactly what the amendments will be, will force many farmers who were looking to transfer their farm to a family member to delay their retirement plans until 2022,” CFA president Mary Robinson said Friday.

“If they transfer to a family member under the current rules, it can potentially cost them hundreds of thousands of dollars more in taxes compared to if this bill was fulfilled.”

C-208, Robinson said, would help “preserve the identity and financial stability of the Canadian family farm.”

The Western Canadian Wheat Growers, meanwhile, said they were “dismayed” to hear of the delay. “Canadians need to understand that this current government is not looking out for the best interest of Canadian family farms,” president Gunter Jochum said Monday in a release.

Federal Conservative leader Erin O’Toole also criticized the Trudeau government in a separate statement Friday for “refusing to implement a tax reduction for small business that was passed in Parliament.” –– Glacier FarmMedia Network

The post New rule on farm transfer tax treatment put off to 2022 appeared first on Country Guide.

Mary Ng, who vaulted to cabinet-level last week to take on an existing small business portfolio as well as a new one on export promotion, said she wants to help companies take advantage of new trade deals with the European Union and Pacific nations that have specific provisions to welcome small business trade.

Prime Minister Justin Trudeau’s cabinet shuffle put trade diversification front and center amid rising tensions with the U.S., Canada’s largest trading partner, with Ng and new Trade Minister Jim Carr tasked with finding new markets for Canadian goods.

Threats by the Trump administration to end the North American Free Trade Agreement (NAFTA) have shaken Canadian exporters. Canada sends 75 per cent of its goods exports to the U.S., which imposed tariffs on Canadian steel and aluminum at the end of May and is now mulling punitive measures against autos.

Ng, the MP for the Toronto-area riding of Markham-Thornhill, says Canada has other options.

“Right now Canada has preferential market access to 14 trade agreements and 51 countries. This is a real opportunity for us. The U.S. continues to be an important export market to us, but I also think there is a great opportunity to enable our small business to access these other markets as well,” Ng said in an interview with Reuters.

Ng said both the new 11-nation Trans-Pacific trade deal and the EU-Canada Comprehensive Economic and Trade Agreement have chapters devoted to increasing access for small business.

She said the new cabinet ministry can “provide them with resources” to access the new markets beyond the U.S., but gave no specifics on funding or programs that will drive the export diversification.

Carr said last week that “an awful lot of affection for Canada” will help the government’s push to diversify exports away from the U.S.

Still, Sean Speer, a senior fellow for fiscal policy at the Macdonald-Laurier Institute, a non-partisan think tank, said the integration of U.S-Canadian supply chains as well as the shared language and culture between the two countries make it hard to change the reliance on the American market.

“It’s not that I’m opposed to trade diversification or the idea we should engage new markets… I’m just skeptical of the idea it’s going to lead to a fundamental re-organization of trade patterns,” Speer said.

— Andrea Hopkins is Reuters’ Ottawa bureau chief.

The post Canada’s new export minister to push beyond U.S. market appeared first on Country Guide.

“I got a letter from the bank lawyers saying I had 12 hours to come up with A$2.4 million (US$1.8 million), and that was an impossibility to do on that notice,” Fox told Reuters.

A third-generation farmer who built up the country’s biggest seed potato producer, Fox said his farm and equipment were sold below value by receivers for the country’s biggest rural lender, National Australia Bank.

Fox’s story encapsulates the issues driving a wedge between Australia’s US$50-billion farm sector and its banks as a powerful public inquiry into financial sector misconduct begins its examination of agriculture lending practices.

Shareholder appetite for continuous profit growth and the widespread closure of rural bank branches have left some farmers with a sense that their livelihoods are controlled by city executives with little care of issues beyond their control such as drought, wildfires and trade disputes.

For Fox, for instance, Indonesia’s surprise ban on Australian fresh produce imports — widely seen as retaliation for an Australian ban on live sheep exports — didn’t affect his type of potatoes. But the bank didn’t see the difference when he reported the shipping delay, he says, and called in a receiver.

NAB’s general manager of agribusiness Khan Horne said Fox’s business was under “extreme financial pressure” by 2013, with “significant creditors dating back to the prior year’s trading, payroll issues and pressure from other suppliers.”

In an email, Horne said the bank hired receivers for the potato farm “based on financial default,” and the receivers “sought to work co-operatively with Mr. Fox to realize value from the business and other assets.”

Stewart Levitt, a lawyer who has represented about 20 farmers in mediation with banks, said banks had to acknowledge that farming was full of ups and downs.

“The whole way you bank farmers has to be different to the way you bank other sectors of the economy.”

Small business, big trouble

Farm banking in dry, hot Australia has often been difficult, but the relationship has become especially strained in the past decade since a wave of mergers and acquisitions left the country’s biggest banks holding loans they might not normally approve at a time of almost continuous drought and volatile commodity prices.

By dollar value, agribusiness is a relatively minor component of Australian banks’ loan books — for NAB, the biggest rural lender, farm loans are about a 10th the size of its mortgage book — but also one of the riskiest and politically sensitive.

A 2017 Senate report on farm finance, which Fox made a sworn submission to, offered a taste of what the more powerful Royal Commission may recommend.

Among the measures recommended by the Senate were a compulsory minimum period before banks can call on distressed farm loans, a ban on banks changing rural loan terms without consultation, and a compulsory national farm debt mediation scheme.

Anne Scott, a principal adviser at the Australian Small Business and Family Enterprise Ombudsman said many farmers still operated like they did when they had very close relationships with their banks.

“But what’s happened is banks have looked at their risk reduction, they see an economic downturn, they’re not interested it might not be very long, they just want to get out of that as quickly as possible.”

The Australian Bankers Association, a lobby group, says it supports a national rural debt mediation scheme.

But it suggests the narrative of banks forcing farmers out of their properties has been overplayed, with only a relatively small number of foreclosures in the primary services sector in 2017.

“Clearly more reform is necessary but it’s critical that the pendulum doesn’t swing so far that it reduces lending and makes home ownership, or running a business such as a farm more difficult,” an ABA spokesman said in an email.

Commonwealth Bank of Australia, which inherited a large farm loan book when it bought rural lender BankWest from HBOS Plc in 2008, declined comment. Westpac Banking Corp., Australia’s second-largest bank, also declined comment.

Australia and New Zealand Banking Group Ltd., which acquired thousands of rural loans when it bought the Australian Wheat Board’s financial services arm in 2009, did not respond to a request for comment.

‘Risky situation’

Banks don’t break out profits from farm lending but the Royal Commission, now at the halfway point, has already wiped more than US$20 billion from the sector’s share prices due to reputational damage and expectations the hearings will bring on tighter lending rules.

Natasha Keys, a consultant to farmers involved in bank disputes who plans to protest outside the hearings, said agribusiness lending should come with extra regulations partly because of the knock-on effect in rural centres when lenders “turn the tap off” and call in debts.

“Rather than the banks holding the debt, you’ve got all these suppliers and all these other businesses around in these towns accumulating debt,” she said.

“It causes a big structural problem. It doesn’t happen in other retail communities.”

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“I was very, very offended by all of this,” said Kurt Oelschlagel, of BDO Canada, who was part of a panel on the government changes at the CAFA event, held Thursday in Guelph and online.

Many of the slides in his presentation were made redundant, as Finance Minister Bill Morneau backtracked Thursday on yet another part of the changes.

The Liberal government’s proposed changes to small business corporations were initially aimed at high-income earners who have created personal corporations to manage their incomes to pay taxes at the lower corporate tax rate.

However, when accountants started examining the potential changes, they were much further reaching and complex than expected. They included changes to capital gains tax, tests that determine whether dividends distributed are to people who have contributed to the business and punitive tax rates on savings made within a corporation.

This week, Morneau has backtracked on two of those proposals, including capital gains. The government will now allow up to $50,000 per year to be saved in passive investments in corporations. He says that means that only five per cent of small business corporations will be affected by the higher passive investment return taxation levels.

At the Thursday event, the organizers played Morneau’s latest backtrack on the policy live, as he stood at an Erinsville, Ont. farm and talked about delaying the implementation of the capital gains changes.

That means most of the day’s presenters had to change their presentations after that announcement and the announcement on passive investment earlier in the week.

Justin To, director of policy and budget director for the minister of finance, was slated to speak to the meeting, but he backed out, citing the announcements by the government of changes to the tax proposals and especially the fact Morneau was making an announcement the same day.

“We live in a representative democracy and it looks like politics is coming into play,” said Stephen Sweeney, a Waterloo, Ont.-based partner at Miller Thomson LLP, a law firm that works with agriculture clients.

Sweeney said it will take 10 years to sort out all the implications of such significant tax changes and instead he suggested that time be taken to do thorough and well-thought-out tax reform, adding that the modern version of the Income Tax Act came into force in 1972.

“More complexity in the tax system means more creativity for tax advisors,” he says. “I’m not sure if it is good that tax advisors prosper by uncertainly felt by ordinary Canadians.”

Farmers were warned their accounting bills would rise due to the increased complexity and on-and-off changes.

One of the significant changes made by the government is in how it will measure who has meaningfully contributed to the business and therefore deserves remuneration in the form of dividends.

John Mill, a Guelph lawyer who works with farmers and farm advisors on tax reorganization, told the meeting that “family members who meaningfully contribute will not be impacted,” but that there will be little legal flexibility if family members are paid without contributing.

If there hasn’t been a meaningful contribution, then the money will be added to “split income” and taxed at a higher level.

He has concerns about how the amount that’s reasonable to be paid for work will be decided. Would it be possible for the revenue ministry to find someone who would do the work at minimum wage? Then anything above the hours worked at minimum wage rate could be taxed at a much higher rate.

The test for “reasonableness” will take in functions like assets contributed, risks assumed and prior compensation. Documenting hours could become necessary, which is a challenge when farmers live at their work and are on call all the time.

“The CRA is missing the point that farmers grow up in the family business. We train farmers in the family business and on family farms.

“Eight hundred million dollars per year (the total of the revenue increase of the new policy) is idiotic with the enormous societal cost of these idiotic policies,” Mill said.

The question has arisen relating to the payment of children of farmers who farm under a corporate structure.

Sweeney said the new “reasonableness” test will likely drive businesses from paying them through income sprinkling and to making them actual salaried employees of the farm.

Scott Ross, director of business risk management and farm policy with the Canadian Federation of Agriculture, said moving family members to employees, if they deserve to be paid, is one of the main goals of the government.

They want to drive activity away from dividend sprinkling and back to salaries, he says.
There was relief at the meeting that some of the most problematic provisions of the Liberal proposals were off the table, but also anger at the time wasted.

“How much non-billable time have we spent on this since it came out?” asked Oeschlagel, adding that many meetings were held with clients to prepare them for potential quick changes to their business organizations by the end of the year.

There remain a lot of unknowns — which will still mean a lot of work ahead for accountants, advisors and incorporated farms.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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Prime Minister Justin Trudeau and Finance Minister Bill Morneau appeared side-by-side in Toronto’s far suburbs to announce the tax cut, highlighting their desire to get past what has become a major stumbling block as the two-year-old Liberal government heads into the second half of its mandate.

“Powerful interests have benefited a lot from the current system, and they will fight hard to maintain the status quo. We knew that going in. But nothing will stop us from building an economy that works for more Canadians,” Trudeau said in a sometimes combative news conference.

Earlier this month Morneau had promised the government would make changes to the July proposals that would address concerns expressed by many affected by the changes — including farmers concerned about the implications while saving for retirement, employing family members or selling their operations to the next generation.

“Our goal is not, and will not be, to change the ability to move a family business, a family farm, a fishing business from one generation to the next,” Morneau told reporters Sept. 28, after appearing before the House of Commons finance committee.

In trying to reset the tax debate, the government said Monday the small business tax will be lowered to 10 per cent effective Jan. 1, 2018, and to nine per cent in 2019.

In one example from a background document on the small business tax reductions, the government cited an example of a farm, summing up the example with the statement that “once the small business tax reductions are fully implemented, the business will save an additional $750 which could be used to help pay for new farm equipment.”

Trudeau on Monday shifted the focus away from those using the loopholes toward the tax code itself. “It’s not the people who are the problem, it’s the system,” he said.

At the same time, one of the most reviled parts of the tax reforms proposed in July — measures to limit access to the lifetime capital gains exemption, a move critics said would hurt the ability of families to pass their business on to their children — was abandoned.

When the owners of an incorporated farm sell their operation to family members they currently face a 25 per cent tax bill on the earnings — but under Ottawa’s proposed reforms it would have jumped to 46 per cent, according to several accountancy firms, including MNP.

The government indicated Monday it would still proceed with a crackdown on income-sprinkling — a tax strategy that sees business income transferred from a business owner to a spouse or child, who would be taxed at a lower rate.

In a statement Monday, however, Morneau and Bardish Chagger, the federal minister for small business, said the government now plans to “simplify” its proposal on income-sprinkling.

The “vast majority” of private corporations won’t be impacted by the proposed income-sprinkling measures, they said, including corporations with family members who “meaningfully contribute to the business.”

In July, Morneau proposed tax reforms meant to close loopholes for those that use private corporations to reduce the amount of tax they pay.

The three-pronged tax reform plan, which affected those who sprinkled income among family members or used passive investment income in order to be taxed at a lower rate, had sparked outrage among doctors, farmers and family businesses.

At its news conference Monday, the government was silent on the topic of passive investment income.

Farm organizations including the Canadian Federation of Agriculture and Canadian Cattlemen’s Association on Monday hailed the government’s announcements as a positive sign that their concerns have been heard.

The CCA said it “look(s) forward to reviewing the technical changes” relating to income-sprinkling, while the CFA said its members “look forward to more clarity” on the matter.

The CFA added its farmer members “remain apprehensive about other proposed tax measures, particularly on passive investments, which are vital for managing year-over-year risks due to weather or market-related volatility.”

The CFA said it has also noted concern with plans that would affect conversion of income into capital gains.

— Includes files from Gord Gilmour, Allan Dawson, AGCanada.com Network staff and Reuters.

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Or maybe your son or daughter has graduated from agricultural college and they want to come home after a few years working off farm. You know there’s risk with new ventures, but they’re brimming with ideas, they’ve got a plan, and you want to encourage them.

You’ve run the numbers. It looks like the enterprise should eventually contribute to overall profits. But how should you structure it? Should you incorporate the main farm and start a separate sole proprietorship for the secondary business, or incorporate and put it all under one? Or how about keeping both as sole proprietorships under separate names? Or maybe you should go for a partnership? Or a joint venture?

Set things up right from the beginning with your long-range vision in mind, advises Allan Sawiak, chartered accountant and succession expert with KRP in Edmonton. “What do you see this looking like in 20 years?” Sawiak asks. “Line up the business structure with that future vision.”

The communication involved in this planning process is invaluable. It forces you to think the business through and to prove its value. It also involves figuring out how you want to take profits out of the farm, and it makes you look at who owns what assets, and to define where the startup money is coming from and the value of that venture capital.

The other question you need to answer at the outset is why you want to do it. It might not be all about profits for everyone. Sometimes it’s lifestyle or for the good of the community. In Saskatchewan, a survey of farmers found they diversified mostly to use available management and labour, and to provide full-time, year-round employment for key hired personnel. The survey also found that these farmers used diversification into off-farm ventures or through non-agricultural enterprises to reduce risk exposure to market and production risks.

Of course, a separate category of diversification projects isn’t really designed with profitability in mind. It’s designed to create enjoyment, perhaps, or to provide purpose, but does not contribute financially. “If it’s unprofitable, it’s a hobby,” says Mark Fournier, a professor at Olds College.

Whatever the motive, the project and the way it’s structured should match the farm’s risk tolerance, which means it needs to be talked about with everyone who’s involved. Share up front how much money you want to make, how much you’ll need to start and operate, and exactly where you’re going to get funding.

There are many ways to structure the secondary business without putting it in the main farm, and although there are positives and negatives to each structure, there’s no right answer for everyone. When Country Guide spoke with three experts — Allan Sawiak at KRP, Mark Fournier at Olds, and Ontario farm adviser Carl Moore — each leaned toward a different format, or leaned away from others, all for good reasons.

#1 — Sole proprietorship

Most farms in Canada are still sole proprietorships. It’s the easiest, cheapest way to do the books, and the land is in individual names. But is it still right when you diversify? “If you’re just testing the waters, it’s a lot less tax hassle and legalities. You just do your books and then go see your accountant,” says Fournier. “It’s easier to get started in a sole proprietorship and good for the first couple of years.”

A sole proprietorship doesn’t require a written legal agreement to start a new venture, so one can be launched without a lot of cost. However, once you start dealing with multiple individuals (even parents or siblings), discussing and writing down the logistics become very important.

Since sole proprietorships don’t have written rules of engagement, it’s even more important to communicate expectations and to respect each other. Tell one another what you hope the business will eventually look like, and do take care not to take essential management time and capabilities away from the core business. “Make sure the family has open communication and a method to resolve problems,” adds Fournier.

When starting a new business, a sole proprietorship can be advantageous if you’re going to lose money for the first few years, since those losses can be put against your personal income. However, once your business starts making more money, you start paying at personal marginal tax rates that are much higher than the small business corporate rates.

“Successful farm operations should not be in sole proprietorships,” Sawiak bluntly says.

Carl Moore, farmer and adviser in Woodstock, Ont. is a proponent of keeping it simple, especially with succession. Generally he encourages his clients to not incorporate and to keep land out of a corporation to take advantage of the rollover provisions. In his experience, he’s found that farmers often can buy enough assets and inputs to mitigate some of the extra tax burdens of not incorporating.

Compared with problems that he’s seen with more formal agreements, the cost of paying extra taxes can be a pittance. He warns that small business taxes and rules around incorporation are becoming more complicated with every government budget.

“Every situation is different and will change, so keep it simple to get in and out of,” advises Moore.

Instead of involving children as shareholders in the farm corporation, Moore says it’s often better for them to set up separate sole proprietorships and buy land under their own names with some help from the parents.

A mortgage is the best way to motivate the younger generation, Moore believes. “It puts the responsibility right where it should be. If it’s all split into shares, passed down between several generations, it’s like no one owns anything, no one takes responsibility.”

#2 — Incorporation

As a tax specialist, Sawiak sees many successful, forward-thinking farmers charging ahead with incorporation. They’ll have that structure in place before diversification is considered.

This can work well for diversification projects, especially with pilot projects. Any losses can be put against the corporation’s earnings, and lower corporate tax rates allow for more dollars to put towards debt repayment or diversification.

Corporations allow more ways to split income and to take money out of the businesses with fewer tax implications.

Then, after a year or two, if it looks like the new business will be strong enough to stand alone, and if you are farming with your sibling and both are shareholders, consider splitting it out of the farm corporation right away.

“It becomes difficult and very costly to split it out of the corporation later,” says Sawiak. “Splitting any family farm corporation that involves siblings as shareholders is very costly.”

Every year Fournier sees students go back to the family farm, many with business plans for diversification. The most successful tend to run small pilot projects under the established family farm corporation, much as any business would try a new product line.

Once it’s big enough, the students might run it as a sole proprietorship or another corporation, or as a division within the farm corporation.

Regardless of the structure, expectations need to be communicated and understood, and all parties must respect each other, says Fournier.

By their very nature, corporations have better records, plus preplanned and written structures for transitions. It’s also easy to run several different enterprises under one corporation, which means that as the farm diversifies it can still operate under one set of books.

Something to keep in mind is what the farm will look like in the future, and if the rules may change. From a tax perspective, farm corporations set up before 1985 missed out on using today’s farm tax advantages such as capital gains exemptions,” says Sawiak. The capital gains exemption came into law in 1985 but before this farmland was typically owned by the farm corporations.

Dealing with a corporation can become more difficult as more people become involved, especially for future generations. “In my opinion, many farm corporations formed in the ’60s and ’70s are now a disaster area for the third generation,” says Moore. “Now with all the sons and daughters, spouses and children involved, there are too many voices.”

Worldwide, about 90 per cent of businesses do not survive through the third generation, says Moore. “Why are we not planning for this rather than setting up business structures that will not exist for the grandchildren?”

#3 — Partnership

With farms, business formats tend to be based on the tax level, says Sawiak. In his experience, it is usually tax planning that triggers changes to structures. “Farmers have deferred, deferred and deferred and pre-bought, pre-bought, and pre-bought, and have run out of options,” he says.

When a farm is at this point, Sawiak tries to move it to a partnership for two years minimum and then into a corporation. This interim step allows them some time to do some strong tax planning and it helps set up the family with future tax savings to grow the farm.

Partnerships that have proper partnership agreements can also help avoid some of the tax problems triggered on death for family farms, says Sawiak.

Before Fournier was a professor, he worked in loans and saw both failures and successes play out. “I’m not a big fan of partnerships,” he says. “When I was a lender there was a saying that was often true: The only ship that’s destined to sink is a partnership.”

Fournier says the problems arise with partnerships if there’s no set agreement ahead of time to deal with problems. Most partnerships are still handshake deals and they can sound like a good idea at the beginning, but then the real world sets in. Things like spouses, splitting income or disability complicate the situation and cause problems.

At least with a corporation you have to talk about it. It’s long term and formal. You’ve paid a lawyer to work out the logistics if something happens, and before you get into it, you have a buy-sell agreement and a way to deal with spouses.

#4 — Joint venture

Part of the problem and a serious limitation for diversifying today is the massive expense to start a secondary farming business that has the scale to compete. This is an even bigger issue for younger farmers.

Joint ventures are a way to maximize resources, diversify, or try something new. Joint ventures allow the younger generation to start farming or diversify a farm at a competitive scale with relatively little capital. Older farmers often use joint ventures so they have more time off and can ease toward retirement.

Carl Moore says although the risk is spread out, usually one individual loses in a joint venture. And usually that’s the more established party.

The individuals involved own the assets and share net revenues, and joint ventures can be set up for whole farms, a portion of the farm, or even just a specific component, such as a combine.

Joint ventures tend to be short-term operating structures and, unlike partnerships or corporations, they don’t require a business number, own anything, or pay income taxes.

The joint venture legal agreement is simply the framework for the parties to work together, but it is vital, says Fournier. “Lawyers get the hard discussion done in advance. It’s cheaper to get them involved at the beginning of business than at the end.”

Fewer farms diversifying

Over the last few years, Allan Sawiak of KRP in Edmonton has noticed a trend toward less diversification. Most of his farm clients are expanding or trying to improve their productivity in the sectors they already do well in, unless of course they’re landlocked, in which case the diversification tends to be directly related to their core production, for example a grain farmer growing or selling certified seed or growing other crops that complement the land and grain operation.

Typically more money can be made by getting better first at the base enterprise before diverting attention and resources to a new enterprise. In the past, sometimes when farms have tried to start a new enterprise, they have taken their eye off the ball and it has resulted not only in the failure of the new enterprise, but damage to the main business too.

Sawiak thinks this becomes more of a factor as farming has become more complicated, specialized and asset heavy. There’s no room for messing up, and there’s more risk getting into a new product range, he says. With the steep learning curve and huge dollars to enter at a competitive scale, diversifying has too many risks.

The success rate of farm diversification efforts is probably not much different from any small business venture; the majority fail in the first five years and many don’t even make it past the first year. Based on the survival rate of other business ventures, only one in five will contribute positively to the financial health of the farm.

With succession planning and adding another family, farming tends to be about doing it bigger and better, and today, successful single or double family farms are doing so much more and are hiring people, says Sawiak

“These farmers are looking for potential access to more profits and, even with higher land prices, are just waiting for the opportunity to expand,” says Sawiak. “There’s little hesitation.”

Sawiak does see mixed farms making little adjustments for their children coming back to the farm, but staying in the same stream. “Heritage is alive and well,” he says.

As farm assets increase in value, diversifying has become less popular, agrees Mark Fournier at Olds College. “It’s too risky to try new things and there’s big dollars at stake. Young farmers trying to make mortgage payments know that they need to make payments from Day 1, they don’t have time to mess around,” says Fournier.

One interesting way to allocate diversification risk is for the senior generation to transfer the base farm to their children and then start a new enterprise as their semi-retirement project. The retiring generation is typically financially established and can put the time and patience into developing something new. Risk becomes less of a factor because they’re not necessarily relying on it for a living. As a result, they’re willing and able to experiment and be creative.

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