Agriculture Committee on Oct. 31st, 2024

[The Vice-Chair, Conservative, John Barlow]

Thank you, Mr. Mount.

I appreciate your understanding of our situation here. As colleagues ask you questions, do not respond; just jot those down. We'll get the questions to you and you can respond in writing.

Now we will go to our rounds of questioning.

For Mr. Nelson, who's new with us, each party will have an opportunity to ask a question in each round. The first round will be six minutes for each member of Parliament for each party.

We'll start with Mr. Epp for six minutes, please.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

Thank you to both witnesses for being here this morning.

Mr. Nelson, your story is remarkably familiar, as I'm third generation. I'll maybe come to that in a moment.

With this sudden change.... I'm going to assume that you and your wife were doing some planning for a while. I was in the same situation, watching my children grow and then realizing that neither my own life path nor theirs was going to lead to a next generation, in my case.

Where do you go from here? Can you expand?

I know it's been a relatively short period of time. Even though it's been several months, I know how long succession planning takes.

Can you comment perhaps a bit on what your options are, ideally? If this change had not come into place, would you have carried on with what you and your wife had planned?

[Mark Nelson]

At this point, we're in a holding pattern. Like I said previously, we were looking to the next step, but that's been completely put on hold currently. We have downsized what we can, but we're also cognizant of the fact that the business is still a machine that requires a certain amount of revenue just to run and stay open. We're cutting back as much as we can.

My wife has actually been doing a lot more off-farm work. It's curious that this seems to be coming up more and more. That has alleviated a lot of pressure for us. We're doing things like this—coming out to tell people my story and hoping that there are some solutions to come in the future that are going to work for us.

Thank you.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you.

Mr. Chair, I'm going to depart from the normal process for a bit.

Certainly, Mr. Nelson, if you have anything else to add and, Mr. Mount, if you want to supply any other comments in response to this as well, please do so.

I want to start with some questions that came out of the first panel.

My personal experience is that my wife and I got married in 1985 and purchased a farm. We were lucky. It was backstopped by my father and mother for the guarantee, but we purchased a large farm at the time. It was $360,000 of debt. Therefore, we had $360,000 of assets.

I think, when the Canadian public watches this, they all of a sudden think we're rich. Well, no, I had $360,000 of assets offset by $360,000 of debt. That's how I began as a third-generation farmer.

When we hear about the numbers today, imagine $360,000 from 1985. In today's dollars, that's maybe $1.6 million to $1.8 million. I wasn't automatically rich. I just had that much in assets and that much debt to begin a business career. I think that, at times, Canadians don't fully appreciate the business of agriculture, which is capital intensive, and how to begin that process.

I've been through succession now twice—once on the way in and once on the way out. I see from the Library of Parliament, which always does such a good job of providing background information, that only 12% of farmers have succession plans in place. Any policy that this committee would recommend, I think, would be great in spurring more farmers to have a succession plan.

This actually triggers a question, Mr. Nelson.

Did you have anything written down that you developed, together with your wife or your family, as far as where you wanted to go?

[Mark Nelson]

Yes, with our financial adviser and accountant, we've been developing this plan for several years now. It's based on the life expectancy of an average Canadian and having a reasonable retirement from the age of 65 on.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

You were also a part of the 12% who were proactive in working ahead, recognizing the kind of business that you were in, only to have the government throw a curveball into years of planning.

[Mark Nelson]

That's correct.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

I will also put on the record that we went through a similar process. My brother and I used the incorporation as a process to buy our parents' assets out over time. It took us about six years. We then became an incorporated model from a private partnership prior to that. We also tried to do everything right. We worked with professionals and developed our own—between my brother's family and mine—succession plan. We dealt with the three Ds, and we forgot something. I've had numerous conversations with other farm families, and that's why I feel somewhat obligated to put this on the record here.

If you're in a business relationship, through insurance, it is possible to deal with the death, divorce and disability processes. Also, in the face of disagreements, it's also possible to set up mechanisms inside a business plan that, over time, can develop transfers.

One thing our family forgot, and perhaps you might be close to the situation, is dealing with something called voluntary withdrawal of a partner. In discussions with many farm families where one partner now wants out... Quite frankly, I'm blessed with four daughters. They're going in four different directions, and none were on the ag side. I hear that in your testimony as well.

We didn't have a formal mechanism short of the blunt instrument of shotgun clauses, which, for those of you who don't understand, is where one partner offers to buy the other out and then makes him or herself vulnerable for the reverse offer back. To deal with and negotiate through a process of voluntary withdrawal that, first of all provides an income to the departing partner, but, secondly, doesn't strangle the operation in its cash flow going forward.... I think you would be in a similar situation with your operation.

I see, Mr. Chair, that my time is coming to an end, so I will perhaps pick this up in another round.

[The Vice-Chair, Conservative, John Barlow]

Thanks, Mr. Epp. I do have to admit that, when you said you were going to go off script, I was a little worried about what you were going to do, but it was a good life experience, for sure.

Now we'll go to the Liberals and Ms. Murray for six minutes, please.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Thank you very much for the opening remarks.

I am very interested, Mr. Mount, in the union's concept of creating some solutions so that the price of farmland is not a constraint to succession or to young farmers buying into this as a business.

What are the barriers? What is the range of barriers that you're addressing with your program? How, if at all, do you see the capital gains changes that apply to the farming sector being addressed in the structure that you set up?

I also wanted to reinforce my admiration for taking this tack, so that other pro-social values, like tackling climate change, reducing greenhouse gas emissions and having sustainability and ecological initiatives, are not huge barriers to the effective transition of farms, given the price of farmland. I know you'll be giving your answers in writing, but I wanted to put those questions to you and to congratulate you on the initiatives that your organization, the union, is putting in place.

I'm also interested in your comments and Mr. Nelson's comments on a question I have about farming and intergenerational transition, and how it differs, if it does, from other entrepreneur's family-owned businesses that produce valuable goods and services for fellow Canadians or internationally. They are businesses that were built by families, by early family members, including the kinds of capital that might not be land. It might be land, where the operations are based, but other investments have been made in capital.

How is that different from, or is it different from, this situation? If there was an exclusion of farmers from these capital gains changes, what would be the rationale for that, while not including other family-owned businesses that also have a succession plan for the young generation to take over the family business?

I'm going to ask Mr. Mount to give me his response in writing, of course, but I'm also interested in Mr. Nelson's view. What's special about family farms compared with family businesses that also require some thought with respect to transition?

[Mark Nelson]

The family farm.... When I first started on the farm, I was working as an employee, so I had the advantage of about 15 years of learning and growing with the farm and developing it. When we were about to succession plan, I already had a really good idea of how we were going to grow it and pay for the expense of buying it.

We very much did it at the right time. It was far less expensive when we did our succession plan than it would be today. That's one of the biggest problems facing young people right now. It's just the astronomical increase in the cost of everything—equipment, machinery, land, all the things, all the inputs and the cost of labour.

I'm sorry, but I'm trying to stay on topic here. Everything has just gotten to be more. Succession planning has become more difficult. The rules have become more complicated. As I said, we did it at the right time, and now we just kind of want to get out.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

I'd like to go back to this question: Is succession in a family farm business substantively different from succession in any other similar-size business with assets that is not about farming and that may be about a range of different things, from forestry to manufacturing? How is it substantively different? If there were to be exclusions for the farm sector, would that then create an inequity with non-farm family business succession challenges?

[The Vice-Chair, Conservative, John Barlow]

Thanks, Ms. Murray.

Mr. Nelson, I'll give you a couple of seconds to answer that, if you can.

Mr. Mount, I see you frantically writing down the questions. I appreciate that, but we will send you the questions in writing via email. Don't get carpal tunnel syndrome on our behalf today.

[Mark Nelson]

Thank you.

How is it different? In large part, there are a lot more threats to farming. You have unexpected weather changes. You have a lot of things you just can't control. Planning becomes more difficult. The expense is just huge, I think, in large part, compared with other businesses. A lot of other businesses have gross annual sales that are pretty consistent. We have years where we're in a loss.

I don't know what else to say.

[The Vice-Chair, Conservative, John Barlow]

Thank you, Mr. Nelson.

Now we'll go to Mr. Perron for six minutes.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

Thank you, Mr. Chair.

I want to thank the witnesses for joining us today.

Mr. Mount, it's a real shame that we can't have a discussion. I think that we have a great deal in common here. You heard the questions that I asked Ms. Bissonnette earlier about land pricing and transition solutions. For example, when a farmer agrees to sell to a person in the next generation, it might be a good idea to add exemptions and perhaps to compensate the farmer if they sell the land for its agronomic value. Given the current land prices, this could help the next generation to make a profit. This would be virtually impossible without a parent sacrificing half their retirement to ensure that the next generation takes over the business. The same applies to productions under quotas. This transition calls for inventiveness.

Naturally, I'm extremely interested in your proposals. I look forward to receiving a detailed submission and reading it carefully. We'll try to make the most of the proposals in order to provide sound recommendations to the federal government in its areas of jurisdiction. I may contact you to discuss certain issues in greater depth and to make sure that I understand the main thrust of your proposals with a view to providing appropriate recommendations. I'm grateful for your input, even though we can't speak directly to each other. I look forward to receiving a fine document.

Mr. Nelson, you're in luck because you have plenty of opportunity to respond today. Witnesses often don't have much time.

You talked about the challenges facing the next generation and the fact that your children don't want to take over the business. You're feeling a bit stuck with the latest changes announced. I want to know your reaction to the fact that these announcements were made in June, but no details have been received as of today, in early November. What does this mean for the community and for a business such as yours? Please answer the question quickly.

[Mark Nelson]

In the short term, my business has always been a fairly profitable business. It's afforded me a decent living. It's not broken. In large part, my wife and I are planners. We're long-term planners. As Mr. Epp said, we're one of the 12%. I didn't get into this knowing that the farm was going to be my retirement right away. I planned for an eventuality of it taking, maybe, five years.

Here we are. We're several months from June 25, and my feeling is that I hope there will be a solution from the government presented to people like me within the next four and a half years. It's not a comfortable place to be, but that's where I'm at, at this stage. I don't see any other options right now.

[Yves Perron, Bloc, Berthier—Maskinongé, QC]

It's hard to plan ahead under these types of circumstances.

I would like to hear your thoughts on what I discussed earlier with Ms. Bissonnette and what I suggested to Mr. Mount. We must find a solution. You'll be selling your land to people who obviously aren't related to you. The proceeds of the sale will become your retirement fund. You can't just decide to sell the land at half its market value, because you would end up living in poverty during your retirement. The government must find a way to preserve the agricultural use of the land and make it accessible to the next generation. This is a key issue.

Would you agree to have the value of your land assessed based on its agronomic yield potential so that the next generation of farmers can hope to make a profit from it and not just pay off their debts and interest, and to have a pension fund or something similar set up to make up the difference?

Please feel free to answer. Is this something that you might consider? Would it make sense, or would it be too far‑fetched? I would like to hear your thoughts on this.

[Mark Nelson]

Having a pension fund would be remarkable. I think it would relieve a lot of pressure, a lot of concern and stress that we all have.

Incidentally, the two very interested parties that did a lot of due diligence on buying my farm were actually intending to carry it on. In fact, most of the people who came to look at it were actually going to carry on. I find that very encouraging. I like the idea of my farm being a farm. I would be disappointed if it got bulldozed, and a bunch of roads and asphalt were put on top of it. Some kind of mechanism where it became a state-owned farm would be really a neat concept. I hadn't even considered it until today, hearing other people speak.

However, yes, both of those, having some kind of a retirement fund and having state-run or state-owned land, would be quite interesting.

[The Vice-Chair, Conservative, John Barlow]

Thank you, Mr. Perron.

Now we go to Mr. Cannings for six minutes, please.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you both for being here today.

I'm going to start with you, Mr. Mount, and try to phrase my questions fairly succinctly so that you can understand what I'm talking about, but I'm going to try to frame it more from my background. I come from the Okanagan Valley in Penticton, British Columbia. I grew up on a small orchard.

One thing that we are proud of in British Columbia is the agriculture land reserve, which solves for us the problem that Mr. Nelson just mentioned of worrying that his farm will turn into asphalt and houses. We can't do that in British Columbia because our farmland is simply too valuable. We don't have a lot of it. Farmers have that land. It keeps the prices relatively down, but like everywhere, the price of farmland has increased. I just looked up the benchmark rate for farmland in the Okanagan Valley, which is somewhere in the mid $30,000 per acre, but there are a lot of sales that are well north of $100,000 an acre. When you add the price of a house on that for a new entrant into the market, it becomes pretty impossible.

I'm so glad you're here, Mr. Mount, to talk about the new entrants part of this study. I'm just wondering, first of all, whether the National Farmers Union works with other groups. In my area there are, and I don't know how widespread they are, the Young Agrarians. That is a group that really tries to help young, keen farmers find opportunities to work on farms, to be mentored by farmers who are maybe retiring and to maybe rent that land and kind of work into it. As I understand, there are all sorts of mechanisms and processes through which they can get that land, whether it's rented, work to own or some co-operative structure.

I know you mentioned some of those things in passing, but I wonder if you could provide details on some of the opportunities for young, keen farmers to be able to get on the land and live that lifestyle that they really are so keen on doing, growing food for us all, and be able to afford it, because they can't just come in and buy 10 acres of land for a million dollars. It's just out of the question. Anything on those co-operative structures, working with retiring farmers, things like that, would be really valuable I think.

I'll go to my second question. You mentioned foreign investors, and that's even when we have...and it's not just foreign investors to me. It's just investors, people who are investing in land. They're not interested so much in being farmers or whatever. They're investing in the land, trying to make a living through those investments. In part, certainly in the retail housing market, that is what has really driven up the housing prices in Canada.

To some extent, for instance, in the Okanagan Valley, a lot of the orcharding has turned into vineyards and wineries, so you have people who come in with a lot of money—because you need a lot of money to start a winery—and they buy the land and build a winery. That has been the mechanism that really drives up a lot of the prices where I come from.

If you could maybe comment in more detail on the impact of investors owning land, owning farms, what has that done for new entrants?

Finally, this is my last question.

You mentioned that the National Farmers Union is interested in encouraging equity-seeking groups, or whatever you would call them, to get involved in farming. I'm just wondering if you might comment specifically on indigenous farmers.

In British Columbia, there's a farm called Tea Creek up in Kitwanga. It's a multi-purpose farm, I guess you could say. It helps young indigenous people find their way if they need that, but it also trains them on farming methods and gets them involved. In my riding, there's a lot of indigenous farmland that is.... I know they're trying to encourage their young people to get involved in that. Can you talk specifically on issues around indigenous farming?

Do we have any time left, Mr. Chair?

[The Vice-Chair, Conservative, John Barlow]

You are out of time. Well, you had two seconds, but now you're out of time.

Thanks, Mr. Cannings.

Thanks, Mr. Mount. You have a lot of work on your table.

Now, colleagues, seeing the time, I think what we can do, rather than take a second round, is give everybody a couple of minutes to ask a question or two, just so that everybody gets a chance. We won't go for a full five minutes, if that's okay with everyone.

I'm going to ask you to just ask a question and have an answer, and then we'll go around the table.

We'll go to Mr. Epp, please.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

I'll direct my question to Mr. Nelson.

I understand that you two are also, despite it not being family, working with Algonquin College on attracting or looking at other opportunities that extend.... As a personal comment, my nephew will be coming to the farm and forming the fourth generation. Thanks to colleagues like ours, Bill C-208 also provides those opportunities.

Can you talk a bit about your efforts there?

[Mark Nelson]

One of my personal beliefs is that volunteerism is very important. I tried to instill that in my own kids. A friend of mine and I were having a beer one night and chatting about the lack of education for farm kids—specifically, the business part of it. A lot of farm kids know how to run the tractors, grow the wheat and bale the hay. What they don't know are all the laws behind labour and all the business components.

We developed a course and went down this rabbit hole for three years, and then we pitched it to Algonquin College. After another three years, it became an actual program that exists at the Perth campus now.

Yes, there needs to be a lot of work to allow farmers to do succession planning and get out. I also think we need to better educate some of the young people to come in.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you.

Thank you, Mr. Chair.

I'll conclude my comments with a statement. It grows out of the first panel, and it grows a bit from Joyce Murray's comments and questions here.

Agriculture is certainly not the only family-oriented, capital-intensive business we have in Canada. What makes it unique is that it's a high-capital, high-cost, low-margin business that is made up largely of price-takers and largely deals with so many factors outside of its control, like weather. In response to a recent survey, farmers can deal with the weather risk and the market risk. Their number one fear was actually government policy risk. Voila—here we sit today.

I'll conclude with that.