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Advice For Young Farmers – for Jul. 29, 2010

The opinion is of ten expressed that young people don’t want to farm. That isn’t really the case.

Farming appeals to a lot of young people, but they usually don’t have the capital available to start even a modest operation or else they’ve examined the financial returns and aren’t willing to accept the risk.

“There isn’t going to be anyone to take over all the farms as the current generation retires,” is another opinion you’ll often hear.

If this was true, you’d think farmland prices would be dropping. Instead, prices are rising. While some of this is due to outside investors, most of the demand is from other farmers. There’s also strong and continuing demand for land to rent.

It is true that the number of producers continues to drop as farms grow ever larger. But there’s no shortage of people who want to farm.

Recently, I received an email from a young couple in southern Ontario who are yearning to own their own farm and they’re struggling with issues common to aspiring producers.

Will and Jan (not their real names) have a couple of young kids and not a lot for savings. They’ve been working off the farm, but Will grew up farming and his dad and other relatives are farmers.

Will’s dad is in grain production. Will is also familiar with dairy production.

He believes that unless you have a large land base, cash cropping isn’t very lucrative. Returns in the dairy industry are predictable, but profits in that industry over the years have inflated quota values. Buying quota is a huge, long-term investment.

Will and Jan are willing to look at other kinds of agriculture to make their dream of farming come true.

There are producers in Saskatchewan and many more producers in Ontario who are tapping into the local food movement supplying the domestic market with everything from wine to goat cheese.

While this has been a growth sector within agriculture, it isn’t for the faint of heart. In addition to production, you need a flair for direct marketing.

The email concludes with the following questions. I may not be the best person to answer them, but here goes.

How do you choose between taking over the family farm and starting your own thing?

Although there are exceptions, most successful farms are handed down from one generation to the next. It’s very difficult to amass the capital needed for a significant farm operation without some help from your family or other benefactor.

Should you jump in and farm full time or should you start by renting a small amount of land and grow to become full time?

The people who jump in and farm full time right away are usually jumping into an existing family farm. Most others work off the farm, while they try to grow their operation.

How much capital do you need for this? Can you just get a loan?

Any funds you borrow will require a significant down payment with your own money and/ or significant assets that can be pledged as security.

It’s great to know there are young people who yearn to be farmers, running their own business. Just make sure you have a sharp pencil and a detailed financial plan.

And if you’re hoping to take over an existing family operation, you need a succession plan. Many family businesses suffer from poor communication. All the cards need to be on the table and everyone must be comfortable with the plan.

Kevin Hursh is a consulting agrologist and farmer based in Saskatoon. He can be reached at [email protected]

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