Once there is significant expansion at the Efficiency stage, new initiatives or those at early stages of evolution can come on stream to continue the momentum built at the Efficiency stage. Integration of initiatives also becomes a bigger part of the agenda.
Revamping business training under CAP
Payments to young and retiring farmers
Access to small scale processing
Marketing board changes
Changes to the Income Tax Act
Changes to the Farm Credit Corporation (FCC)
Revamping business training under CAP
Business planning has been a component of the Canadian Agricultural Partnerships (and its predecessors), but has been criticized for some time for it's focus on traditional approaches to farm succession. Attempts to better integrate CAP programming with NGO new farmer programs have only been minimally successful. For example, Everdale Environmental Learning Centre in Ontario, operating successful new farmer programming since the late-2000s (for an agroecological impacts assessment, see Laforge and Levkoe, 2018), attempted to convince OMAFRA staff to advocate for changes to the then Canadian Agricultural Skills Service (CASS) under the Renewal Pillar prior to the rollout of its successor program in APF2, Agricultural Skills Development. Although in theory Everdale's program would have been considered eligible for reimbursement for training and business plan development expenses through CASS, in reality, numerous CASS program requirements significantly limited Everdale participant eligibility. Following several meetings with OMAFRA staff, and their resultant fuller understanding of the circumstances of new entrants, OMAFRA negotiations with the federal government and other provinces in the Growing Forward process were able to produce some program tweaks, but the new program also still contained too many assumptions of farm family background and control over farm assets to be viable for new entrants (cf. Robicheau, 2012). Subsequently, Food Secure Canada (2016) proposed changes to business planning and other CAP measures to improve success for new entrants. None of their recommendations have been implemented and given existing timelines and negotiations are unlikely to be for the next round of the agreement (the new agreement to come into effect in 2023).
Programming for new farmers in the CAP is under the Markets and Trade Priority Area, which provides some insight into how government officials think about their initiatives. The programs are about expanding domestic competitiveness, not about renewal which at least in the first APF was the pillar for such programming. The problem remains that programming primarily focuses on farmers with control over existing farm assets, and in fact, programming has gone backwards regarding enhanced participant eligibility since the shift from APF to GF around 2009. For example, the current PEI Future Farmer program has the following eligibility requirements:
- a projection of at least $20,000 in annual gross farm sales in their business or succession plan (those with other requirements but not a plan may be eligible for coaching);
- ownership of at least 15% of the common voting shares or be the beneficial owner of a 15% interest in the partnership (for farms with gross sales of $1M or less) or own at least 10% of the common voting shares or must be the beneficial owner of a 10% interest in the partnership (for farms with gross sales of more than $1M);
- a Canadian citizen or a Permanent Resident;
- a resident of Prince Edward Island who is therefore eligible to own land in the province not having farming income on an income tax return with more than $40,000 (cumulative) in the fifth and previous years to the applicant’s acceptance into the Program
Funding is of course cost shared, so farm finances must be sufficiently robust already to provide the cost share or to get a loan for it. And PEI has primarily smaller operations relative to many other regions of the country (although some commodity areas, such as potatoes, are heavily capitalized). Equivalent thresholds for eligibility in the Prairies would be substantially higher.
Clearly, programs targeting farm family members are easier to manage and administer and in theory have a lower risk of failure. They can also appear to be more in line with domestic and international market expansion, given the conventional framework in which all this has evolved. It may also be a suitable approach to assure transition of large expensive operations. But the number of participants needed to take over a wide range of farm types and scales requires a broader strategy and the narrow approach currently taken will not be sufficient to resolve the problems.
It may be impossible for administrators to create one integrated program. While maintaining what currently exists to attract family farm members, it will also be critical to have a second program (or perhaps one program with 2 streams), equally well supported, that focuses on new entrants. A few key features of such programming to be compliant with a new approach include:
- New farmers must be able to demonstrate they will, once funding is agreed upon, be enrolled in a recognized business planning program, but do not have to be enrolled in advance of application
- Each province must broaden their list of eligible programs beyond those offered by conventional farm organizations and consultancies to include those specifically designed for new entrants without farm assets
- Some of the funding should be provided upon approval, the rest upon completion of the business plan to help with expenses for new entrants
- Funding should also be provided for mentoring by an experienced farmer with similar production systems.
- New entrants should not have to demonstrate a pre-existing level of control / ownership over farm assets.
- Spousal assets should not limit eligibility
- Participation in a recognized land link program and any lease agreements for land, equipment, livestock and other assets between retiring and new farmers should be recognized as suitable access to farm assets.
Payments to young and retiring farmers
Evidence from Europe suggests that wider angle efforts to improve optimism about farming and community services, in combination with young farmer payments to help with the start up period, can have a positive impact on succession. In other words, from evaluations, payments alone may not be sufficient incentive (May et al., 2019). But with the right surrounding measures, two EU programs have potential applicability in Canada: EU Measure 6 ‘Business start-up aid for young farmers’ under the 2014–2020 CAP which provided maximum funding of €70,000 over five years; and under the 2007–2013 CAP, Measure 113 ‘Early retirement scheme’ (Common Agricultural Policy, Pillar II) which encouraged early retirement of elderly farmers with a pension of up to €15,000 a year for up to 10 years. These address both sides of the coin, the need for retirement income, and transition supports for new farmers during the start up phase.
For young farmers, such payments could also be bundled with sustainable transition payments (see Goal 5, Sustainable Food).
Access to small scale processing
Part of that effort to create more supportive environments are rural development initiatives. For many new farmers at small scales, access to small scale processing is particularly important. See Goal 6 economic development and Goal 2 Rebuilding regional infrastructure.
Marketing board changes
Most provincial milk marketing boards have new entrant programs and many chicken boards have small flock programs. A few boards have very small programs for short supply chain, artisanal and sustainable producers under permit systems that provide access to a limited number of producers at scales beyond exemption, but often under quota minimum requirements (for a province by province breakdown, see Mundler et al., 2020). Such programs have likely been easier to implement in chicken because of the expansion of consumer demand and resulting increases in quota available. It is likely that most of the dairy quota is granted to farmers with family backgrounds and some existing farm assets. Programs are small usually 2-6 / year and not that much quota is provided. Some also have specific designations within new entrant streams for sustainable production.
Since the conventional production industry will need to shrink, the focus should be on new entrants doing sustainable production and scaling up and out the existing programs which represent probably less than 1% of production. This would minimize any short term substantive challenge to the dominant production models (Mundler et al., 2020). For dairy, it makes sense to focus on farm relatives or non family but experienced farm children taking over other farms that don't have successors because of the scale and expense. Small flock programs are helping small to medium enterprises and these can be targeted to new entrants to agriculture. But also needed is a transition program to help farms ramp up from small flock to small quota as current quota minimums are too great to be viable in most cases. This also should focus on sustainable production. These could be very targeted to approved small flock operations that need access to scalable quota.
Gradual decapitalization of quota in association with demand - supply co-ordination (see Goal 2) could assist with inter-generational transfer.
Changes to the Income Tax Act
Revenue Canada has been making changes that could in some circumstances reduce the burden of inter-generational within family farm transfer. The tax rules regarding farm transfer are complex, and much of the discussion of the transfer revolves around tax implications for both the parents and the children.
Bill C-208 (passed 2021) amended paragraph 55(5)(e) and section 84.1 of the Income Tax Act to increase the options available to tax professionals assisting clients with inter-generational transfers of shares for a small business, family farm or fishing corporation. These changes were introduced because the tax regime was penalizing sale of shares to family members more than sale to non-family third parties, clearly a perverse outcome.
The fundamental issue is that if farms are on some level public goods, not just small businesses as largely viewed by the tax system, then it is critical to keep them producing food which means it is critical to have a qualified farmer. The tax code does not reflect the fundamental importance of food to society. The key change is having tax policy makers recognize this and revamp numerous tax provisions to facilitate farm viability and succession, reflecting the spirit of the 2021 changes, but extending it. This requests extensive consultation with the agricultural, fisheries and tax profession sector to assure the changes meet their intended purposes.
Changes to the Farm Credit Corporation (FCC)
Current FCC programming for new and young farmers offers support for those already with significant connections to agriculture. The Starter Loan is primarily for someone who's started a business in the last 3 years. The Young Farmers Loan is primarily for expansion for farmers under 40, as similarly is the Young Entrepreneurs Loan for farm and food-related businesses. They also have Transition Loans to assist with farm transfer. While these are useful, they do not really address those with no traditional existing farm assets. Recoverable assets are the key impediment. The FCC should establish a program that mirrors the business training changes under the CAP (see above). If a new farmer has CAP-funded business training and an associated plan, then they should be eligible for a specialized New Farmer loan program.
