All Things Considered – July 2012

The headlines were all too similar. Farmers were, on average, getting older and had never been older.

This came out of Statistics Canada, which reported in the 2011 Census of Agriculture that the average age of a Canadian farmer is 54 years.

The Globe and Mail led off its report saying, “Canadian farmers have never been older, raising questions over who will produce the country’s food in the coming decades.”

Many reports noted that the rise of grey power has been a cause of concern for a decade, with the average age rising from 49.9 in 2001. Almost half of all farmers are now 55 or older. In 2001 that number was fewer than 41 per cent, and less than 10 per cent of farmers – 8.2 per cent to be exact – were under the age of 35.

Along with aging, the number of farmers is also shrinking as farms get larger. There are now just 294,000 farmers out there, 10 per cent fewer than five years ago, and almost three-quarters of them are male. In fact, the average size of Canadian farms increased 6.9 per cent between 2006 and 2011, from 728 acres to 778 acres. In Saskatchewan, the average farm size jumped 15.1 per cent to 1,668 acres, the largest increase in the country.

The increase in size is reflected not only in the number of acres but also in cash receipts. For example, there are 3,298 farms with cash receipts of more than $2 million. This is up from 2,700 farms in 2006 or an increase of 22 per cent. In 2011, 6,304 farms had cash receipts of more than $1 million, but less than $2 million. In 2006 there were 4,614 farms in that class. Meanwhile the number of farms in the middle fell dramatically. The percentage of farms with receipts of $100,000 to $250,000 fell 21.6 per cent and the percentage of farms with receipts of $250,000 to $500,000 was down 10.6 per cent.

According to the 2011 Census of Agriculture, the 9,602 farms with $1 million or more in gross farm receipts accounted for almost half of the gross receipts for the entire sector. In other words, fewer than five per cent of farms generated almost 50 per cent of the receipts. In 2005, 3.2 per cent of the farms had receipts over $1 million and accounted for 42.8 per cent of receipts (at 2010 constant prices).

Looking at poultry and egg farms, gross receipts increased by 9.8 per cent during the five years from 2005 to 2010 to $4.0 billion, while the number of poultry and egg farms fell by 2.1 per cent.

Also, it is official that 2005 to 2010 was a terrible time to be a hog farmer. Gross farm receipts for hog and pig farms fell 33.2 per cent (at 2010 constant prices). Statistics Canada says hog farms represented 1.7 per cent of all Canadian farms and reported 8.1 per cent of all gross farm receipts in 2010, down from 2.6 and 12.5 per cent in 2005.

Statistics Canada’s agriculture balance sheet shows that for poultry and egg farms, the average total assets of $4.9 million are up 37 per cent from 2005. The bulk of the assets – $4.6 million – are long-term assets. Meanwhile, total liabilities (long- and short-term) are just over $1 million. The result is, on average, a net worth of $3.88 million.

For the sake of comparison, dairy farms have an average net worth of $2.66 million, while beef and grain farms show an average worth of $1.16 million and $1.65 million respectively.

For Canadians in 2005, the median assets of families were $229,930 and the median debt was $44,500. Their median net worth was $148,350, according to Human Resources and Skills Development Canada. In 2005, the principal residence and other real estate represented 42 per cent of the total assets of all Canadian families.

Not surprisingly, median family net worth peaked at $407,417 where the family head was between the ages of 55 and 64. After age 65, net worth declines as people tap assets to pay for retirement.

What does all this add up to? Well, the average farmer is getting older (but aren’t we all?) and there are fewer of them. With the exception of beef and hog farmers, farmers are doing fine and poultry farmers are doing extremely well when compared to the average farmer and Canadian.

But there are challenges.

The age thing will take care of itself. The shift to fewer and bigger farms looks to be continuing. For poultry, the constantly rising average value of fixed assets – $4.6 million – is daunting. A decade ago I thought poultry was experiencing an asset bubble, but I was wrong, as the 37 per cent increase in the last five years shows. Today with the average poultry and egg farm worth almost $5 million and much of that in quota value, I don’t know what to think. Perhaps supply and demand – limited supply of quota and strong demand – will continue to pull quota prices and values upwards. Or maybe quota values will plateau. But to figure out what will happen you need a better crystal ball than I have.