Fewer Farms in Canada: Moving in the Right Direction

Commentary, Agriculture, Sylvain Charlebois

Statistics Canada recently provided the latest snapshot of the nation’s changing agriculture industry. The numbers show that between 2001 and 2006 the number of farms in Canada continued their long-term decline. The data also shows that in 2006 Canada had 5,902 farms with gross farm receipts of $1 million or more, compared to 4,453 five years earlier. Undeniably, the small farm in Canada, once the heart and soul of our society, is being left behind.

Many pundits are claiming that the family farm is in crisis and that something ought to be done to prevent its downfall. Granted, it is regrettable that family farms are disappearing. But traditions must evolve with the times or else risk becoming liabilities to society. Our agriculture is certainly in transition, in view of the fact that global markets are becoming ever more competitive. The new economic reality is that Canada has too many farms and the recent census shows that Canadian agriculture is gradually moving in the right direction.

A hundred years ago, the earliest farmers in Canada took control of their food supply by planting and cultivating family-owned plots. Since that first harvest, farmers have searched for ways to improve production to feed the world’s ever-expanding population. As a result of profitable consolidation, the number of farms in Canada decreased steadily since 1885. While this trend is nothing new, agricultural policies in recent years have kept many family farms on unnecessary life-support. Last year, federal and provincial governments spent an average $3.53 in subsidies for every dollar earned on Canadian farms.

But the problem is not exclusively found in exaggerated domestic subsidies. A few decades ago, Canada provided more subsidies to their farmers than the U.S. and Europe. Today, it is the other way around. Over the last five years, U.S. farmers have received an average of 20 billion US$ a year in subsidies and other payments. European farmers are supported by 60 billion US$ in annual subsidies. Worse still, other emerging nations are jumping on the subsidy band wagon. Just last week, a Parliamentary Standing Committee on agriculture in India asserted that it cannot compete with the amount of subsidies that developed countries provide to their farmers. The committee recommended that efforts should be made to pass on more subsidies to small farmers.

With a smaller economy that must regularly cope with unforgiving weather conditions, Canada cannot pretend that it can compete by providing more subsidies to myriad small farms. To cost-effectively farm in a global economy, size matters.

For years now, politically-motivated governments in Canada have made a practice of giving to every farmer. Indeed, farmers are being exploited for political purposes, but are in turn being supported by urbanites. Farmers, urbanites, and governments have formed a love triangle to prop each other up. Governments offer agricultural subsidies to get votes from farmers. In turn, farmers provide low-priced food products to urbanites so governments can capitalize on more political support from cities. This three-way dependence hampers Canadian agriculture’s capacity to prosper on its own.

Perhaps the most harmful aspect of current Canadian farm policy is the fact that government payments are linked to the production of specific commodities, so that farmers become locked into producing those specific commodities. This suppresses entrepreneurship and value-adding strategies that might otherwise lead farmers to growth and diversification. These sorts of interventionist policies were promoted in New Zealand until the country eliminated all farm subsidies in 1985. The change unleashed a burst of imaginative and entrepreneurial activity since farmers were no longer penalized when producing anything except subsidized commodities. Since then, agriculture in New Zealand has never been more profitable.

Our geographic and climatic realities are naturally far different than those of New Zealand, but our agriculture can also proactively modify its current methods to better prosper in the new global economy. Agricultural policies must aid farmers to reach economies of scale and encourage innovation. If these changes are made, the recognition that Canada has too many farms will soon be self-evident. Ultimately, policy should lessen the burden for farmers to ease their way out of domestic constraints.

The major challenge for government will be to manage the transition to a more competitive system. Not all elements of the food industry are positioned to smoothly make the transition, especially some primary producers. Many fear the consequences of change. Conscientious policy initiatives are required to mitigate the impact of the transition on these individuals and their families. Inaction on the part of government is not an option because change to agriculture will continue to be irrevocable and will probably accelerate in pace.

The only question is how we will manage and respond to change. The first move should be to leverage any initiative that would significantly reduce the number of farms in Canada.

Sylvain Charlebois is Associate Professor and Wolfgang Langenbacher is Professor Adjunct from the Faculty of Business Administration at the University of Regina (Saskatchewan).