(A) Definition of a Young Farmer

In spite of the existence of a federal organization for young farmers, namely the CYFF and its members scattered across the country, there is no unique definition of a young farmer. Evidence indicates that the definition of a young farmer varies according to provinces and stakeholders’ perceptions. In its testimony, the CYFF defined a young farmer as being under the age of 40 (namely between the ages of 18 and 40),[15] while for the Fédération de la relève agricole du Québec (FRAQ) a young farmer varies between 16 and 35 years of age.[16] In Prince Edward Island, the Young Farmers’ Association indicated that its membership is comprised of young farmers aged from 17 to 30 years. Some stakeholders also have their own opinions on this matter.

[...] I say farmers under 35 should be classified as young farmers and that is where the bar needs to be set.[17]

In addition to the difficulty in identifying the age bracket of young farmers, the CYFF and the FRAQ agreed that there is a lack of information on the number, the locations, the size, the scope and the type of young farmers’ operations. According to these organizations, it is important first to know how those farms are structured, what their characteristics are before developing any tools, initiatives or programs targeting young farmers.[18] Therefore,

Recommendation 2.1

The Committee recommends that Statistics Canada add as promptly as possible questions in the Census of Agriculture questionnaire that will enable the establishment of a profile of young farmers in Canada.

Several witnesses underlined the importance of young farmers in the development of agriculture and the development of rural communities. Indeed, young farmers guarantee the future of agriculture as they are necessary to replace the increasing number of retiring farmers. They also contribute to the economic vitality of rural communities as many activities and services are involved with the agricultural sector. It is therefore important that they remain involved in agricultural activities.

The average farmer today is 60 years of age. If no one in the younger generations can take their place, everyone will have to pay more for the food they eat and it will mean a loss of jobs in the other branches that deal with agriculture in general.[19]

Except for certain sectors, young farmers revealed to the Committee that the farming profession cannot ensure a good standard of living as agriculture is not always profitable.

I think that if there was a return, that a lot of people would probably think it was a good occupation or an interesting occupation and be inclined to pursue it. I think that they probably would.[20]

In conclusion, the best way to keep young farmers in the industry is to make it profitable. Farming is a lifestyle, not just an occupation, but, at the end of the day, you still need to make money. We do not expect our health professionals to work for free, and we cannot expect the producers of our food to do so either.[21]

Young farmers aren't going to invest millions of dollars in something they don't know is going to produce a return. So supply management provides that to them and it gives them stability.[22]

In their testimony, young farmers showed their love for farming; they appreciate the lifestyle. Nevertheless, this passion alone is not sufficient to convince them to set up in agriculture. They consider it first and foremost as a business that must be profitable. They are therefore willing to tap into market opportunities even if there are challenges that need to be overcome.

(B) Challenges and Opportunities for Young Farmers in Agriculture

a. Access to funding and farm transfer

Most witnesses revealed they need loans to improve the economic viability of their farms through investments in technical support, land and infrastructure. Others need loans to set up in agriculture via farm acquisition. However, young farmers are facing some difficulty in obtaining financing from financial institutions because young farmers do not have enough assets to secure their loans.

Farm Credit Canada, which has been established for many years to help farmers, when I went to them about interest rates and mortgage loans, told me that they couldn't help young farmers because they didn't have the background or the assets, which is part of the security, but being in the business they're in, they need to help the young farmers, because the old farmers won't be around that much longer.[23]

There is a federal program intended to facilitate young farmers’ access to credit—the Canadian Agricultural Loans Act program (CALA). This program is a financial loan guarantee program. Farmers, including “beginning farmers” can use the loans to establish, to improve and to develop farms. According to some testimony, loans under CALA are not accessible as the program is not sufficiently flexible. Furthermore, some young farmers find it difficult to comply with certain of the program’s criteria.

Under CALA, beginning farmers are defined as farmers who intend to be or have been engaged in farming in Canada for less than six years. Some young farmers indicated that they have more than six years of experience in farming and, therefore, were not eligible for the program even if they were considered to be young farmers.

To be classified as a beginning farmer by Farm Credit Canada or the Canadian Agriculture Loans Act, you must have less than six years of farming experience. So by the lending institutions and government standards, I would be classified an old farmer at the age of 25.[24]

Implementing this six-year limit could financially penalize young farmers who want to become established farmers but have more than six years of farming experience. It has been suggested that an age bracket, in lieu of the criterion of six years of farming experience, be set in order to properly consider young farmers. Therefore,

Recommendation 2.2

The Committee recommends that Agriculture and Agri-Food Canada review the eligibility criteria of the Canadian Agricultural Loans Act, including the six year of farming experience limit, in order to take into consideration the age of applicants.

Another limit of the program that was mentioned by young farmers is the security loan criterion. The CALA requires financial institutions to take a security interest in accordance with normal lending practices.[25] Providing this security is difficult for young farmers that are starting out in the sector, do not have assets and have tuition debts (for those who graduated from academic institutions). Also, some of them have to lease land as this asset is too expensive to be purchased but this practice is detrimental to them. Indeed, lending institutions do not consider leased land as a valuable asset.

[Accessing financing] I did have to come up with capital for infrastructure and start-up expenses. Because I didn't own the land, even though I had a 99-year renewable lease on that land, which is as secure as ownership, no financial institution and no government program would recognize that as equity for securing a loan.[26]

Given the financial challenges that the CALA poses to young farmers, some of them consider that the program was designed for large operations that have enough capital to be eligible. They would like to see funding programs intended for small operations. In this regard, they presented some programs available at the provincial level that could be implemented at the federal level.

In Saskatchewan, the Livestock Loan Guarantee (LLG) program provides producers with alternative financing options to purchase livestock, or to construct or to expand feedlot facilities. Some producers also use the program as a management tool to generate cash flow. Credit access is at competitive interest rates, and livestock and assurance fund deposit of producers’ association serve as loan security. Eligible applicants are at least 18 years of age. The Government of Saskatchewan guarantees 25% of the outstanding amount on loans at the time of a first default. In the case of a default after all inventory has been disposed of, the association repays loans from the assurance fund before any payment is made under the government guarantee.[27]

A program structured similar to the Saskatchewan Livestock Loan Guarantee Program [guarantee] might allow young farmers to purchase land or equipment at lower interest rates with a lower down payment. The Saskatchewan Livestock Loan Guarantee Program is the only reason I have grown my cow herd to its current size. It has allowed me to continue growing my cow herd when the banks in this country would not even look at my applications.[28]

In Quebec, the Financière agricole du Québec, which is a crown agency, manages the Financial Support program for Aspiring Farmers. The purpose of this program is to assist young farmers in setting up and encourage them to acquire adequate training. More specifically, the program subsidizes the start-up and establishment of agricultural businesses. It also provides young farmers with protection against rising interest rates. Eligibility criteria are based, in particular, on age (18 to 40 years), recognized training and ownership of at least a 20% share in the business.[29]

We could have lower interest rates for new entrants. There is currently a commitment from the Financière agricole du Québec, but could we not see lower rates supported by Agriculture and Agri-Food Canada? That could be significant, because starting up an agricultural farm, whether it is dairy or other, requires a considerable amount of money. Lower interest rates could make a difference.[30]

Other provinces such as Alberta, Manitoba and Nova Scotia also offer programs that include interest rate rebates, which the federal government could use as models for creating such programs.

There are different funding support models across Canada for new entrants to farming. Alberta, Manitoba, and Nova Scotia have crown financial credit agencies attached to the ministry of agriculture that lend to farmers at reduced rates.[31]

Given that these programs mentioned by stakeholders have achieved positive outcomes,

Recommendation 2.3

The Committee recommends that Agriculture and Agri-Food Canada improve the Canadian Agricultural Loans Act or create new programs by adding tools similar to those available in provincial programs, such as interest rate rebates, in order to improve access to credit for new farmers.

It is worth noting that in addition to government programs, there are also some industry-run initiatives designed to encourage young farmers to acquire assets through loans. These programs were mostly implemented in supply-managed commodities to facilitate quota ownership. For example, in 2006 in Quebec, the Fédération des producteurs d’œufs de consommation du Québec launched the Programme d’aide au démarrage de nouveaux producteurs d’œufs de consommation. This program targets new non-family farmers. They must hold at least 60% of the share of the business and possess a degree in agriculture or management. Eligible applicants must be between 18 to 40 years of age.

The producers who have taken advantage of this program have settled in various regions in Quebec—Chaudière-Appalaches, Saguenay-Lac-Saint-Jean, Pontiac, Lanaudière and the Eastern Townships.[32]

The Fédération des producteurs de lait du Québec, through the Programme d’aide à la relève en production laitière, offers five kilograms per day of butterfat quota through a loan spread out over 10 years. The farmer must hold at least 50% of the shares of the business to be eligible. In addition, the applicant must be between 18 and 35 years of age and possess a degree in agriculture.

In Québec and Ontario, dairy farmers associations lend 12 kilograms per day of butterfat quota. This loan enables young farmers to start off a dairy farm with 25 to 30 cows. The program should be available in Nova Scotia in August 2010.

When it is difficult for young farmers to access government and industry funding programs, many have to rely on their families to finance their establishments, especially for family-run businesses.

[...] it takes a very significant amount of shares in farming in order to get a return. Therefore, the current generation almost always finances the transfer of farms to the next generation. Whether we are talking about the grains sector, supply management or any other sector, the price of land, quotas, shares do not allow the purchaser to fully finance the acquisition through the bank. It is the current generation that finances the next generation.[33]

However, accessing funding through this channel can still be difficult for young farmers. Indeed, for the majority of retiring producers, income derived from farm and land sales is the farmers’ retirement pensions.

The sale of a farm has to provide for the seller's retirement and cover any existing debts the business has.[34]

As agricultural asset values are high, retiring farmers are reluctant to sell their farms below market prices, and young farmers do not have enough equity to acquire these assets. In that context, parents often prefer to break-up their farm in order to sell or transfer parts of it to their children or to others.

We have never struck a deal because the reality of trying to purchase a dairy farm is that break-up value of the farm is greater than the business's ability to cash flow.[35]

Farm dismantling is an obstacle to the establishment of young farmers in agriculture, but the needs of retiring farmers to obtain the best income from their farm sales is understandable. To avoid such a dilemma, the Fédération de la relève agricole du Québec suggested that a farm transfer savings plan be designed. This plan would encourage producers to invest in a pension plan in conjunction with governments. The fund would be available to retiring producers only if they transfer their farms to the next generation.

Given that this suggested program might not only facilitate young farmers to set up in agriculture, but might also ensure a reasonable pension to retiring producers,

Recommendation 2.4

The Committee recommends that Agriculture and Agri-Food Canada conduct an analysis of how the farm transfer savings plan recommended by the Fédération de la relève agricole du Québec could be designed and implemented, and that Agriculture and Agri-Food Canada report the outcome of this analysis to the Committee within three months.

Some witnesses also highlighted the importance of farm succession planning and intergenerational communication as a key step of this process.

As one generation looks to exit agriculture, we look for ways to encourage another to enter and succession planning is critical.[36]

[...] we're trying to equip our young farmers with the ability to go back and talk to mom or dad or grandfather or grandmother about the challenges that exist in succession, and in day-to-day management.[37]

In order to learn how to communicate with their relatives, some young farmers admitted that participation in workshops or training sessions was helpful. They were able to share their experiences and learn some techniques aiming at facilitating discussion with older generations on succession planning. They would also like to see retiring farmers attending these sessions in order to increase their awareness of farm succession planning.

Tax incentives exist at the federal level to ease farm transfers between generations. Provisions within the Income Tax Act such as Capital Gains Exemption enable intergenerational transfers, whether before or at the time of death of the farm owner, with lower tax consequences. Some witnesses felt that the amount eligible under the current Capital Gains Exemption could be increased, while other witnesses encouraged the fortification of other intergenerational transfer models to make the transition easier for the next generation of farmers. In addition, given the fact that not all intergenerational transfers are directed to the children of farmers, the Committee was urged to look at creating opportunities of intergenerational transfers to other related and non related people.

One witness criticized the fact that market value is considered for the calculation of capital gains rather than the economic value of the farm property.

[Farm transfer], but there is also the problem of the economic value of the business as opposed to its market value. People are taxed on the market value, but the true price of the business should be based more on its capacity to generate money. That is where the business transfer becomes a problem.[38]

Some would like to see the capital gains deduction limit increased while others do not think that is necessary.

Increasing the capital gains exemption when selling the business to children could make a huge difference.[39]

The capital gain exemption greatly assists in inter-generational transfers. I think from time to time there is a lobby to have that increased. I don't feel that it needs to be increased. A husband and wife get $1.5 million; my own personal opinion is that it shouldn't be used as a tax shelter, and I think it's quite adequate where it is.[40]

Most of the programs target young farmers from farming families. However, it is important to also consider young farmers who are not from the farming sector and are interested in acquiring farms. In this regard, the Government of Quebec has recently designed a program aiming at facilitating farm transfer to young farmers who have no relatives in agriculture. According to some witnesses, this program should be implemented at a federal level.

One thing I would strongly encourage you, as the Standing Committee, to keep an eye on is the capital patient program that's coming out in Quebec through the work of the FRAQ. If this does come out and work the way they expect it to, this is something we should be looking at on a national level.[41]

b. Young farmers and education

Although some witnesses mentioned that the current generation is more educated than older generations, the majority admits that young farmers need to be better educated. Acquiring planning, financial, and risk management tools and management practices could improve the efficiency of farms, contribute to reducing farmer debt and provide opportunities to create value-added products.

I think there's far too many producers who don't pay enough attention, not only to their operation but to their costs and to their banking. I don't think there's enough out there that do know their costs.[42]

It is important to keep farmers educated and up to date with current processes and technological developments. This is what creates efficiencies and more opportunities for us on the farm.[43]

Witnesses pointed out that producers, instead of isolating themselves, should have a collaborative approach. They need to work together in order to share information, to learn from each other and to work towards a common goal. They need to compare their technical and economic data in order to pinpoint problems that need to be resolved.

Mentorship is also seen as a valuable activity whereby young farmers or new entrants can learn from experienced farmers. The latter can thus pass on their know-how, advise young farmers on day-to-day farming activities and provide moral support. This activity, according to witness testimony, is all the more useful since it allows new entrants who have not been raised on a farm to acquire enough knowledge to operate their farms efficiently.

Industry stakeholders have undertaken some actions aimed at providing farmers with best management practices. For example, the CYFF offers best management practice sessions where participants can share information and carry out economic benchmarking. In Ontario, FarmStart—a not-for-profit organization—offers the New Farms Incubator Program where young farmers benefit from business planning support, technical training and mentorship.[44] The British Columbia Young Farmers’ Association holds activities such as business-training workshops, development planning and industry networking. However, these types of initiatives are not spread across the country. For this reason, young farmers would like to have more support from governments in order to augment this type of service. They would also like federal programs related to young farmer training to be restored.

There used to be more government extension workers in our area and I miss them. Some of them were quite helpful. The dairy nutritionist was particularly helpful any time you ran into trouble with cattle.[45]

Our recommendations to aid young and future farmers are as follows: [...] Government assistance for young farmers to take the training and development needed to run profitable business like the CASS (Canadian Agricultural Skills Services) program which was also available under APF.[46]

Some concerns regarding a possible reduction of federal government contributions were expressed. Some organizations that are involved in agricultural extension services benefit from these contributions.

I am dismayed somewhat that at this point in time there is a question with respect to renewed funding for the Canadian Farm Business Management Council. In terms of business trade that is one of the key resources in Canada, in terms of extension materials. I'm hoping that the federal government can step up to the plate and do something there.[47]

c. Public awareness and “buy local” initiatives

One of the barriers to the entry of young farmers in the agricultural sector that was regularly mentioned was the disconnect between citizens and farmers.

There are still people in the city and in urban areas who do believe that we can’t produce chocolate milk because our cows are all white.[48]

This disconnect can result in frustration that weaken relationships between citizens and farmers especially in rural areas. Indeed, an increasing number of urban residents seeking rest and nature settle in rural areas but are not willing to bear smell and noise from farming practices. According to some witnesses, this behaviour would be corrected if the public was better informed of agricultural practices. It is therefore necessary to educate consumers and increase their awareness of agricultural activities. Some organizations (e.g., the Canadian 4-H Council) carry out activities such as conferences or on-farm activities to encourage young people from both rural and urban areas to choose careers in the agricultural sector.

Some young farmers suggested the introduction of agricultural and/or food science courses in school curricula. These courses could be compulsory like English or Mathematics courses and could be completed with on-farm tours.

If you can expose young people to agriculture so that they understand the industry, I think that would be really important [...] It needs to be a key component of primary education, elementary education right through to the high school level.[49]

Farmers also should open their doors to the general public, showing their daily practices and their efforts that go into making a quality product. Whether it be tours of the operation, open farm days once a year, school field trips, all of these will educate the present and future adults.[50]

The Canadian 4-H Council also suggested that industry stakeholders, in partnership with the federal government, establish new methods of communication using electronic platforms in order to efficiently reach young people and increase their awareness of farming activities and agricultural careers.

The Committee recognizes that access to agricultural courses in school programs would allow youth to be aware of farming activities and practices and could also foster youth involvement in agriculture. Therefore,

Recommendation 2.5

The Committee recommends that Agriculture and Agri-Food Canada offer to cooperate with the provinces, notably through the Council of Ministers of Education, Canada, in order to consider the possibility of including agricultural courses or introducing agricultural issues into existing programs or courses.

In addition to public education, it is important that a positive image of agriculture be promoted. The agricultural sector produces high quality food and contributes to the economic growth of the country.

There needs to be a solid recognition of the contribution that agriculture makes to our overall economy, to rebuilding suffering rural communities, to fulfilling the demands of local food by your urban voters, the huge financial contribution to export markets, and the substantial economic ripple effect of food-related industry.[51]

This positive image could not only attract young people but could also encourage local food consumption. Local food purchase is perceived as a way to improve the agricultural sector’s profitability hence the development of “buy local” and “buy Canadian” initiatives by producers. Movements such as the 100-mile diet and Buy Local New Brunswick have emerged across the country. Witnesses also highlighted the importance of promoting farmer markets and of developing advertising campaigns and labels in order to increase public interest and therefore sales.

We need these buy-local campaigns to identify those kinds of attributes but also to be able to identify local products in grocery stores.[52]

We've done some market surveys and consumer testing and certainly understand that there is very good will at the moment for the consumer to be purchasing locally [local purchase], but they don't know what they're buying. It's a problem when the labelling isn't there.[53]

The local markets are a great idea, [...], but we're in the commodity market. We're going large scale. How much room is there for these little markets? Until we get this labelling thing under control, to prove that a product was grown and raised and produced in Canada, and put that in the large-scale chains, Loblaws and other large grocery stores, we're never going to make it.[54]

The federal government could also play a key role in local food promotion by drawing inspiration from provincial campaigns such as Select Nova Scotia[55] which was launched by the Nova Scotia Ministry of Agriculture, Fisheries and Aquaculture.

Recommendation 2.6

The Committee recommends that Agriculture and Agri-Food Canada, in collaboration with industry stakeholders and the provinces, encourage “buy local—buy Canadian” campaigns in order to promote local food consumption across the country. The Committee also recommends that Agriculture and Agri-Food Canada launch a national campaign to promote the benefits that agriculture provides to Canada and Canadians.