Canada Markets

The Conference Board of Canada released a study titled Seeds for Success: Enhancing Canada's Farming Enterprises. The Conference Board of Canada is described as "the foremost independent, not-for-profit applied research organization in Canada." The board's mission states: We are dedicated to building a better future for Canadians by making our economy and society more dynamic and competitive.

This particular study is just one of 20 individual studies that will be released by the Conference Board's Centre for Food in Canada that will be combined to form a food strategy which is to be released in March 2014. The goal of this study is to look at the current industry while keying on ways "to achieve greater economic and social value."

One point of interest is the study's look at what constitutes a farm. This study keys on the business aspects of the enterprise which are defined by financial criteria. For the purpose of this study, farm operations are valuated similar to any other business, utilizing a combination of business net-worth along with a valuation of the future earning potential for the operation. This varies from Statistics Canada analysis, which simply views an agriculture operation as one which sells production of any kind and in any volume, and also the Canada Revenue Agency, which uses a $10,000 revenue hurdle to define a farm.

When considering the various ownership structures of the farm, the study concluded that the family farm is alive and well, with the report concluding that farming remains "almost entirely a family-owned and -operated pursuit." The family-owned operation, regardless of structure, is viewed as a beneficial business model that outside businesses wish to replicate, with benefits ranging from the availability of labor to an increased commitment to the operation.

When one considers profit margins for farm operations, the study found that the size of the operation has little impact. Over the period studied, more than 50% of farm operations had exceptionally high profit margins of more than 20% or very low profit margins of below minus 10% in any year. Over the 10-year period, the smallest revenue farms have made up a greater share of the top-quartile of profit margin returns than larger farms, while also making up the largest share of operations in the lowest quartile of profit margins received.

Within the agriculture sub-sectors in Canada, one would think that the heavily-regulated supply management operations, found in the dairy and poultry sectors, would enjoy the highest profit margins, although this was not necessarily the case. Over the 10-year study, grains and oilseed producers alternated with dairy producers to generate the largest share of the highest profit margin quartile, meaning that the grains and oilseeds sector can achieve the same profit potential as can the supply-managed sector.

Of the producers surveyed for the study, the two highest priorities identified by grain producers was the need to lower operating costs, which was identified by over 50% of respondents, while better marketing came in second at roughly 33% of respondents.

Four key managerial needs are identified for the farm operation:

-- Managing capital -- includes rent vs. own decisions, as well as finding the right balance of land versus equipment

-- Managing marketing -- includes finding markets, determining what to grow as well as managing associated price risks

-- Managing people -- involves meeting human resources challenges within the operation

-- Managing relationships -- utilizing partners and networks and outside parties with specialized skills to meet the challenges within the operation.

Of the eight strategies for success identified, the eighth and final strategy is titled Begin Farm Planning With Marketing. It is suggested that farm planning begin with marketing, rather than end with it. Producers are encouraged to seek ways to become "price-makers" as compared to "price-takers."

This study can be found at The Conference Board of Canada at http://www.conferenceboard.ca/….

Cliff Jamieson can be reached at cliff.jamieson@telventdtn.com

(ES)

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