Agriculture Committee on Nov. 5th, 2024

[Allan Melvin]

We conducted a survey, as I noted, last winter, 2024, in Nova Scotia, and I think it's fairly reflective of the situation federally. We have about 8% with a detailed succession plan. That doesn't mean that the other 92% don't have something on the back of a napkin or haven't kicked it around their minds, but that's what's been formalized and where there's a good plan in place.

As part of that survey, we had results trying to identify barriers and what those might be, and the biggest barrier is the financial challenges. Again, it's going back to the risk profile of agriculture. It is outstripping the returns that we can get on the fairly low-margin, high-volume systems that we're on now.

Another hot button was finding a successor. If you don't have a child or a niece or nephew who's worked in the business and is interested, it's challenging to find somebody as a new entrant to come in and take over that farm.

Lastly, legal and regulatory hurdles were the other top item identified. The constant evolution of accounting, taxation rules and legal changes was seen as the other challenge in getting that succession plan in place.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

We know around this table for sure that farmers are often land-rich and cash-poor. They really do put all of the money that they make back into their operations. We see that from coast to coast to coast. I know personally I've certainly seen investment firms of various makes and models offering investment opportunities in farmland. That is something I've seen grow over the last number of years.

I think agriculture operates in a very unique space. I hear from all the witnesses around the table, saying that when it comes to these capital gains rules changes, farming needs to be treated in a special category. What about the investment firms that are using agricultural land as an investment vehicle? Do you have a position on how we should differentiate between succession planning among immediate and extended family, and also these investment firms that are investing in farmland for a return?

[Allan Melvin]

I would say you have to look at it from the family farm perspective or the small business perspective. Within the tax code, there's small business and there are large corps. I expect that oftentimes those investment vehicles or investment firms would be considered large corps and treated differently, even within regular taxation. I would suggest that it would have to focus in on the family businesses, the ones that are ingrained in the rural fabric of Canada and drive the economic success and resiliency that we have.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you.

Moe Garahan, maybe I'll turn to you, because I've been interested in how, in my own backyard, new entrants into agriculture manage with the astronomically high prices of land. I know there are some unique relationships being set up in B.C., where the Young Agrarians are trying to set up those relationships between farmers who have the lands but may not have the wherewithal to continue farming with the same intensity that they once did.... We have productive farmland not being used, so they want to allow someone who has the will to get in there and start farming it. I know some of the financial arrangements that have been put into place may allow for farmers to lease their lands to these new entrants.

Do we have to be careful when we're looking at these new financial relationships in the context of these capital gains changes? Is there anything you want to guide our committee through on that?

[Moe Garahan]

As mentioned, I think that Young Agrarians is a good example. There are examples right across, from coast to coast to coast, some of which have been presented here. There are many on-the-ground models, both business and structures, that allow for independent farm businesses to either work on owned land.... I would like to see that if there's a transition in place, because then you become a tenant farmer in the long term. I think there can be some benefits.

We've seen really great examples of existing farmers allowing young farmers to get started, which allows them to build up a market, build up their skills and build up their ability to then finance their own operation elsewhere. I think they're seeing successes on that. I think we have to be a bit careful and we need to look for equity models that allow new entrants.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

They were built up there.

[The Chair, Liberal, Kody Blois]

Unfortunately, we're out of time.

Mr. Gourde, you have the floor for five minutes.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Thank you, Mr. Chair.

My first question is for Mr. Beauvais, from the Fédération de la relève agricole du Québec, and it concerns the next generation of farmers in Canada.

You have our utmost admiration. You're facing major challenges in your sector. You currently represent less than 1% of the Canadian population while probably contributing 7% to Canada's GDP. No other sector that employs so few people contributes as much to the Canadian economy as yours does. You can be proud of that, and know that we support you.

It is crucial to expand Bill C‑208 to include the transfer of farms to nieces and nephews.

I, too, am a farmer. I have grandchildren, and I am transferring my farm to my son. It's a sheep farm, like yours. My grandchildren, my daughters' children, also come to the farm, and perhaps one of them will one day want to be part of the family farm. For that reason, the bill must be expanded.

Now I want to talk about patient capital. Currently, patient capital is still held by former owners of farmland when farms are transferred. They have to use interest-free term notes, and it's extremely complicated. Currently, Canadian society does not contribute to patient capital for agriculture. Very few people support it. What's your take on that?

Rather than investing billions of dollars in the industrial sector, Canadian society, through governments, could help increase patient capital to help the next generation of farmers. Would that be possible?

[David Beauvais]

Thank you for your question.

You're talking about issues related to the agricultural sector. Agriculture is an economic pillar, but it's much more than that. It's about land use. It's also cultural. The issues are much more complex than just the economic side.

As a matter of fact, the Fédération de la relève agricole du Québec has been calling for enhanced patient capital for years. Investing in crops is not risky. Agricultural entrepreneurs aren't going to up and move their land to another country. It's not going anywhere. We're asking that financial institutions and governments make a significant contribution to patient capital by granting long-term loans at low fixed rates, which would make it possible to reinvest in our community.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Thank you, Mr. Beauvais.

Mr. Caron, you talked about agricultural trusts and other trusts. How are they funded to bring patient capital to the next generation of farmers, who will really need it in the years to come?

Every year, we unfortunately lose many young farmers. People my age leave farming at 60, and sadly, too many young farmers leave after five or 10 years because of a lack of funding, a lack of patient capital.

[Martin Caron]

Thank you for your question.

As you just said, some sort of patient capital system could be set up to help agricultural trusts. That's really the direction we need to take.

I would say that, overall, the discussion we're having today comes down to Canadians' pantries. That's the bottom line. Only 6.2% of Canada's territory is currently being cultivated for agriculture.

As you mentioned, Mr. Gourde, we need to invest in patient capital to give young people who want to become farmers access to these lands.

Earlier, I mentioned that 22% of farmers had a succession plan, but 78% of farmers don't. Therefore, measures have to be taken fairly quickly.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Thank you, Mr. Caron.

The Union des producteurs agricoles is based on the solidarity of the agricultural community. Should that solidarity be extended to all Quebeckers?

We should send the message to everyone that they need to invest in patient capital for agriculture in order to help the next generation of farmers and ensure the future of our agricultural sector.

[Martin Caron]

Absolutely.

It is essential to invest in patient capital, in both Quebec and the other provinces. I think that Canada's future, food security and food self-sufficiency are currently at stake.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Do you think that all Quebeckers or all Canadians should invest their RRSPs in agriculture and take pride in the idea of ensuring the sustainability of Quebec and Canadian agriculture?

[Martin Caron]

I think that's an important vision for all of Canadian society, and we've gotten to that point. Our society realizes that farmers don't just feed people—we aren't just feeding our fellow Canadians. We are also fighting climate change and supporting biodiversity, among other things. A farm is an entire ecosystem. We are actually able to propose solutions to Canadians.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Thank you, Mr. Caron.

[The Chair, Liberal, Kody Blois]

Thank you.

We'll now turn it over to Mr. Louis for up to five minutes.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Thank you, Mr. Chair.

I want to let all of our witnesses know that we appreciate their being here today for the study on the intergenerational transfer of farms. However, I want to start with the statement that farmland itself is a finite resource that is essential for food production, for sustainability and for our rural economies.

I'll focus on Ontario. Right now, only 5% of Ontario's land mass is suitable for agriculture, so we need to protect farmland. We need to better use other land for development, both for housing and for economic development.

Being from Wellington, Ms. Foster, I'll start by mentioning a local farmland issue in Waterloo Region, where I'm from. We've heard from many constituents who are concerned right now about expropriation of farmland for industrial use in the Township of Wilmot, in my riding of Kitchener—Conestoga, and I share their concerns.

I believe we can use lower-quality lands, not prime farmland, that have the necessary infrastructure, which would have much fewer negative social and environmental impacts, and I agree with the Ontario Federation of Agriculture's statement that it strongly supports rural economic development where that does not undermine our precious and finite agricultural resources.

Ms. Foster, what strategies would you recommend that could optimize the use of the limited agricultural land we have for both farming and also necessary development? What can we do to make sure we're striking that balance? Are there any policies or strategies you can suggest?

[Coralee Foster]

I don't feel that's something I'm comfortable, in my capacity, speaking to.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Okay. I could ask the same question, then, of Mr. Melvin from the Nova Scotia Federation of Agriculture.

[Allan Melvin]

Yes, I think, from a land preservation perspective, we need to look at putting that control into the hands of the industry. Too often we rely on municipal jurisdiction and things like that, which can change with a pretty broad brush. Having a multi-tooled approach and the ability to put land banks and easements in place and things like that is, I think, going to help with the long-term security of agricultural land and, ultimately, our food security.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

I appreciate your mentioning land banks, and you did in your opening statement. I think you touched on something, which is that we have multiple levels of government—municipal governments, possibly regional governments, provincial governments and then the federal government—but they all need to work together. Can you expand on land banks, specifically in Nova Scotia, and on how they can protect against development and ensure that prime agricultural land remains available for agriculture use, and maybe expand even on how land banks can also support new farmers or younger farmers who are looking to enter the agriculture sector?

[Allan Melvin]

Sure.

I think a few others on the call might be able to answer the question around the preservation piece, but I think, from a new entrant perspective, the land bank certainly is a good financial tool to take that capital burden and shift it off the balance sheet, the liability side and the borrowing costs of a new entrant. There are different models, but it gives them, ultimately, a point in the future when they could potentially purchase and pick up that land equity at a realistic operating value.

From a land protection perspective, there are other tools that can be layered on top. You can layer easements into that land bank to incentivize and things like that.

However, I think there are some folks from Quebec who can probably answer how their model is working at this time.

[Tim Louis, Liberal, Kitchener—Conestoga, ON]

Yes. If anyone wants to weigh in on that, I would appreciate it. If not....

Ms. Foster, we heard about the low percentage of farmers who have a written succession plan in place. Is there outreach that we can do? Can you provide an overview of some of the federal programs that can support that, maybe through Farm Credit Canada? How can we reach out to more farmers to help incentivize them to do that planning?

[Coralee Foster]

I don't think it's a lack of awareness. I know that when we talk to our clients about what they want to know more about, succession planning is always the top of the list. I think there's certainly an understanding that it needs to be done. As I said before, I think that a lot of the time it is presumed or there are intentions; it's just not formalized.

Certainly, FCC may be one avenue. I mean, it has its hands on a lot of producers, so it does a lot of education. Certainly, if there's scope for it to continue to do that, I think that's great.

Again, I think it's just about the general security of knowing that, if they are putting a plan together, they're going to be able to act on it. A plan is not going to come to fruition in a few months or years, really. It's a long-term proposition. A lot of people in agriculture, my family included.... My kids are the seventh generation to farm, so sometimes it's just presumed that that's what's going to happen. Often it does, but it's not necessarily in the most efficient manner.