Thank you, Larry.
I've met Larry and I've met Blake. For those of you who don't know me, I'll give you a bit of background about myself. I'm 35 years old, so I've been through university. I have a bachelor of arts degree in recreation and administration, which makes you wonder why I'm sitting around a table talking about agriculture. Anyway, currently I work as the assistant general manager of the Canadian Angus Association, with the largest beef breed in Canada. I'm also a partner in our family's purebred Angus and Hereford operation.
As a little background on that, just for the scope of it, at its peak, we ran approximately 1,000 purebred black Angus and 1,000 purebred polled Herefords on about 6,450 acres of land: 2,450 of that was crop, 1,000 hay, and the balance of that was in pasture. We dispersed our big herd in 2008 and reduced some of the land in 2009. Now we currently operate on 1,750 acres and have about 250 head of black Angus.
After the herd dispersal, one of my brothers, along with my father, continued to operate the farm day to day. My youngest brother now works in the oil and gas industry, and of course, just as I mentioned, I work for the Canadian Angus Association.
In light of what we're talking about here today, I think I'm a pretty good example to know what happened. I know the background on why the three of us, when we came to the fork in the road, all chose a different path.
I'll talk about the challenges of agriculture. Agriculture is in a very difficult position. Many of the decisions that will be made within the five years will affect the industry for decades. There are many areas of concern that need to be addressed. There's no single answer and there are no quick fixes.
One specific issue is the relatively small number of young individuals choosing primary agriculture, specifically beef production, as their sole business or profession. Through my work with the Canadian Angus Association, we keep statistics on these kinds of things, and the average age of an Angus producer is reaching 60 years old. So they're looking to retire.
Although the solution is complex, the reason young Canadians are not choosing primary agriculture is simple. That reason is simple economics. It's cost-prohibitive to start a farm, and there are many more attractive options. A viable farm operation is a multi-million-dollar proposition, and if you manage this operation with above-average standards, you could expect to see about a 4% return on operating. This would be with no regard for any capital investment. This is not an attractive business plan to take to a bank or to any investor to invest in your farm operations.
For those who do choose to enter agriculture, they are faced with many challenges to starting or continuing with an existing operation. The current financial reality, the ability to access funding for either operating or capital is difficult or even non-existent. As everyone knows, farming is weighted very heavily in capital investments. The cost of purchasing enough land, cattle, and machinery and to have a viable operation is very expensive. In most cases, interest rates are generally higher than the expected rate of return. This is even in well-managed operations.
The financial funding model for primary agriculture needs to be changed in order to allow farmers to have access to financing or to be able to attract investors. As one generation looks to exit agriculture, we look for ways to encourage another to enter, and succession planning is critical. On a typical farm, there's a backlog of generations. In many of these cases there are multiple generations operating within one farm operation. It's possible to have a generation in their eighties who still own the land, a generation in their sixties looking to retire and still waiting to inherit their land, a generation in their forties who are fully involved and waiting for their parents to inherit the farm, and yet we are still expecting the younger generation in their twenties, who have just completed college or university, to become involved. They're expected to dedicate their life to a promise that they will take control of their land at about the time they're looking to retire. This is not an attractive option for a young individual.
There was a time when capital purchases were more in line with the revenue and were not as cost-prohibitive as they are today. In central Alberta, within my lifetime, it was possible to purchase a piece of land and pay for it with two good crop years. During this time it was feasible to purchase land from the older generation and move on. Today this is not feasible.
I believe we need to change the approach to farm succession from a tsunami—which would be all at once, where you just buy the other generation out and move on—to gentle waves coming in and out. As we phase one generation out, we can bring another generation in, and not have one generation completely waiting to try to just take all the burden on themselves.
We need to change the culture and mentality of succession in Canada. This change may be more attractive for outside investment in primary agriculture. This could be accomplished with government assistance for farm operations to consult with financial planners to develop long-term intergenerational programs for succession of ownership similar to the way the environmental farm plans are set up. This would need to be done in conjunction with training for accountants, lawyers, and financial planners and with tax incentives structured for people to enter agriculture and not just exit from agriculture, as in the case of the capital gains program. This structured transition would allow each prospective generation to have the security that they're not giving the farm away or working for nothing.
Another option is to develop a mentorship program. This would see financial assistance or tax incentives for farm operations to bring on a new member, family or non-family, and provide on-the-job training. Farm operations are generally asset-rich and cash-poor. They are unable to compete with the salaries provided by other industries. There are young individuals who would love to work on a farm but who are unable to because the salary provided would leave them close to poverty.
There would be a benefit to administering this mentorship program through the municipality, at a county level, through agricultural societies, or even through agriculture-based associations. The reason for this is to keep its focus narrow. This narrow focus is to keep it to people who are local, who are in agricultural fields that they are interested in and have previous experience in, and who wish to continue in that industry. The financial assistance from the government could be viewed as similar to the cost of training at a post-secondary institution using farmers as professors. There is no better teacher than someone who has made a living in the business.
Because of the diverse nature of agriculture, many of the current and previous government programs are complicated.They are intended to serve a broad range of farming operations, and through that, in the end, they end up helping very few. They're often not understood by farmers and even by some financial professionals. If the program method is the answer, they need to be flexible and simple in design to allow for better understanding by farmers and by financial professionals.
When there is a financial model developed that allows agriculture to be profitable, people will choose it as a business. It's a great place to work and raise a family, and it has a long and proud history. However, until there is a more feasible financial model, we'll see people, including workers and investors, migrate away from agriculture and move into other professions that are more lucrative.
Thank you.