AgriSuccess
Your money - Full-time or part-time farming?
Lorne McClinton
There’s an old saying that you can never have too much money. However, it is certainly possible to have too little. The Statistics Canada Low Income Cutoff Rate (LICO), the most common method for estimating poverty in Canada, places the national after-tax poverty line in rural Canada for a family of four at $22,206 ($11,745 single).
If your farm isn’t netting this amount, someone in the household has to earn outside income to keep the family above the poverty line.
Off-farm income is becoming steadily more common for Canadian producers. In the 2006 Census of Agriculture, nearly half (48 per cent) of the 327,055 census farms reported off-farm income. That’s hardly surprising since the same census showed that 44.2 per cent of farms don’t make enough gross sales to cover their total operating expenses.
While many farms are financial success stories, producers often choose to farm for cultural – not economic – reasons. If a second job is the only way to make the farm viable, it’s a price they’re willing to pay. This makes agriculture a very unique business. For example, many Ontario producers have worked 40 hours a week at an auto plant to be able to farm on the weekends; few would be willing to do the reverse.
Either way, it’s important to have a written business plan to help you define and meet your goals, says Harris Ivens, who teaches farm business planning to new organic farmers at the Everdale Environmental Learning Centre in Hillsburgh, Ont.
“All partners in the farm operation should sit down, look at the big picture and discuss what role they want their farm to play in their lives as early as possible,” Ivens explains. “Discuss what your goals are and what you want your work-play balance to be. Ask each other if you want the farm to be a full-time or part-time venture and decide what your guiding principles are going to be.”
Once you answer these essential questions and set your basic goals, Ivens says the next step is to work out how you plan to reach them. If you want to make a living from farm income only, how can you make it happen? Do you need to reach a certain scale, or is value-added processing a better option? What are
the risks?
If you plan to remain a part-time farmer, remember that there are only so many hours in a given day. You can only work 90-hour work weeks for so long before something has to give.
Your money - More small farms
The U.S. Census of Agriculture shows that small farm numbers are growing rapidly in the United States. Even though the Canadian census doesn’t show it, the publisher of Small Farm Canada magazine says the same trend is happening here. Tom Henry believes the difference may be in how the two countries classify small farms.
“In the U.S., farms with gross sales up to $250,000 are considered to be small farms,” Henry says. “In Canada, the cutoff is $50,000. I see a lot of small farms starting to become really successful here too. Some now have sales in the $250,000 bracket, getting up into the range of what used to be considered a good-sized family farm.”
Small farms account for half of the farms in Canada. Henry says his magazine’s circulation research shows that most of these are clustered within a one-hour commute of an economic hub. This is because land closer to cities is often cut into smaller parcels, and because producers – or their partners – have to commute for work.
“To flesh out the observation, the boomers are retiring and there’s a whole young generation that really want to tap into the local food movement,” says Henry, who also farms on Vancouver Island. “There are a pile of them out there, renting, leasing, borrowing, buying farmland and starting up little enterprises.”
The 2006 Census of Agriculture showed more than 60 per cent of census farms with gross revenues below $10,000 took outside work. One-quarter of all farms with gross revenues of more than $250,000 supplemented with off-farm income.
Distance matters
Commuting isn’t just a concern for part-time farmers. It’s also a major cost in sparsely populated regions. Producers in these areas usually have long commutes to do just about anything.
Consider a 100-kilometre round trip to the nearest machinery dealership for parts. If you drive a late-model pickup and factor in all the costs, including depreciation and maintenance, this parts run hits about
$40 before you buy a single nut or bolt. And that’s before you pay yourself or hired help.
Distance really starts to cost when you look at moving farm equipment to distant fields. The total cost of owning a Class 7+ combine, excluding labour, is about $280 per threshing hour, or $4.66 per minute. If you attach half that value to engine hours, it costs just under $7 every time you transport the combine one mile.
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