For those concerned about the future of Canadian farming, the inability of farmers to capitalize their own farm is a serious issue.
Land ownership is the most stable and lucrative part of farming; without a pathway towards it, many people who want to farm will inevitably choose other business opportunities, typically outside of their communities.
The future of family farming in Canada thus depends on farmers accessing the kind of farmer-centric capital that puts them in a position to own.
Capital that leads to farmland ownership for farmers is, first and foremost, a lot of capital. It is also capital that respects a farmer’s autonomy, patiently allows for growth and secures against downturns, and shares the value created, including farmland appreciation.
i) Farmers need a lot of capital
The scale of farming needed to reach efficiency in Canada is bigger and more expensive than ever before. As a result, Canadian farmers are having difficulty piecing together enough equity, finding the bank debt they need, or accumulating enough money renting to afford a farm of their own – or a large enough farm to accommodate multiple children. This is true across the country, independent of who is permitted to own farmland.
ii) Respecting a farmer’s autonomy
The poor history of outside investors operating farms in Canada is proof positive that, when it comes to farming, Canadian farmers know best. It only makes sense then that farmland investors respect a farm operator’s expertise, autonomy, and understanding of the local area. Investment capital works best when it is a tool that a good operator can use to help grow his or her business.
(iii) Capital should be patient
With so much capital required to grow, farmers today have difficulty investing in improvements that would maximize their productivity. Capital that is secure for a longer term allows for those improvements to be made and ultimately adds value.
Agriculture is also cyclical. Unlike debt, patient capital decreases an operator’s risks by providing long-term stability.
(iv) Shared value for farmers
An operator that grows the crops and expands the farm deserves to share in all aspects of a farm’s overall value, especially the appreciation.
This should not be controversial. Investors in many other industries provide principals with ‘sweat equity.’ Tech investors, for example, often provide startup entrepreneurs ownership in the business even where the entrepreneurs contribute no capital of their own. They do so because, without the entrepreneur, there would be no business to invest in. The same is true in farming. Great farmers build great farms, and they deserve to share fully in the value that they create.
Operators that share in a farm’s appreciation are better positioned to own and grow. That is not just a good thing for the operator; it is a good thing for his or her community. Value that stays on the farm gets reinvested locally, creating more opportunities for farm-related business, making the area more attractive, increasing the value of surrounding lands, and giving talented children an opportunity to farm that is equal to those for which they would otherwise leave.
Canada needs its next generation to build strong rural communities. The only way to do that is by empowering them with capital that is significant, farmer-centric, and shared in a way that makes growing a farm competitive with other opportunities.