The variety of food grown is astounding as is the diversity among its processed products. The landscape is home to tiny farms and large ranches, local processors and those who export worldwide. This is a province of mountains, islands, rivers, ocean, lakes, ports and flyways, valleys and plains.

The romantic pull of farming for the lifestyle and the beauty of B.C. lures young folks, just as they are captivated by the lifestyle of riding the ranges in Alberta or working the spacious plains of Saskatchewan, exploring the diversity of Manitoba, milking cows in the East or harvesting the vegetable patch in the Atlantic. However, looking at the production of food through the lifestyle lens does not ensure success.

Rural life is not a fairy tale. Agriculture everywhere has its struggles. Climate events, market prices and disruptions, labour shortages, evolving regulations, choke points in infrastructure, and exhaustion are part of the reality, regardless of the landscape.

It’s a tough gig, farming.

You do have to love it — but you’ll love it a lot more if it provides a living wage for the proprietors and the employees. You’ll like it a lot more if it gives you the headspace, often taken up by worry, to create and innovate in your own business. You’ll enjoy it a lot more if your farm contributes to building a resilient community.

As we seek sound business opportunities that will be foundational to the long-term prosperity of the farm and ranch, regardless of the location, size or scope, it is important to understand the finances of that business. The lack of financial literacy is crippling to startups and ensures a slow bleed on established enterprises.

When the young couple bought the farm, they had stars in their eyes and big plans of feeding the community. There would be a variety of animals and steady traffic to the farm stand. They were new to farming but willing learners on the ‘how to’ run a little farm and readily accepted advice and quickly implemented it. When it came to the business plan however, they refused to discuss it, claiming it would ‘all work out.’

What was uncovered in the process of a continuing conversation with these new farmers was this simple fact: They were not familiar with common business terms.

It was not that they did not desire a financial plan or were against a business plan — they just did not want to expose the fact that they did not understand the language within it.

This conversation brought to light one of the greatest challenges in agriculture today and that is the lack of financial literacy within the demographic of farming and food production. No matter how great the industry — regardless of the diversification and the opportunity — the success of the farmer or rancher is highly (if not wholly) dependent on their financial acumen. Financial literacy is to business what data is to research.

The children who were in primary school were given a loan, with interest, to purchase laying hens, feed and the wood to build the chicken coop. The first year they paid off the loan and the interest and by year two were able to cash flow any operational expenses. Fast-forward five years and these children now own and sell a variety of poultry and poultry products and have established a small cow herd with their earnings. These young entrepreneurs run the enterprise based on the financials. The resiliency they build in their business will help them weather future production or financial storms.

Watching equity erode or getting to the point of insolvency is stressful and life changing. Many of the farmers who have faced this admit they did not understand the financial terms or covenants and they were too embarrassed to ask.

Rather they hoped, instead of planned, for a better year. Often a farm in trouble today is a farm that was in trouble yesterday. The owner simply did not have a full appreciation of the gravity of the compounding issues nor expect such a terminal outcome.

It is never too late to learn.

Children, youth, young adults and mature farmers are welcome to reach out. There are experts and resources in all areas of Canada that welcome the conversation.

We don’t wish to see our children, parents or neighbour fail. The sooner we ask for clarity, the quicker we may be able to get back on track. The sooner we advocate for financial literacy as part of the curriculum from kindergarten forward, the greater the chance of resilient businesses in our communities.

We need financial literacy in schools, clubs, communities and homes for the next generation of farmers to succeed to the point where they are secure enough in business to afford and enjoy the desired lifestyle of the farm.

The farm is not a legacy. It is the people in it who are. It is those people who build the future by nurturing business acumen in our youth and new entrants — and ignite all that is possible in the diverse and exciting profession of farming.

The post Schoepp: More farms need to plant the seeds of financial literacy appeared first on Alberta Farmer Express.

There are 33 “administrators” of the federal loan guarantee program across the country, some operating in just specific commodities or provinces. Advances of up to $1 million are available with the first $100,000 interest free. But some charge a fee and the interest rate can vary.

Alberta Wheat’s program has no fee and an interest rate of prime minus 0.75 per cent, as does the Canadian Canola Growers Association (the largest administrator) and several others.

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Fifteen organizations, one school and one municipality in the province shared $282,000 grants given out by FCC AgriSpirit Fund, which supports rural capital projects across the country.

The charitable initiative of Farm Credit Canada awards $5,000 and $25,000 for community improvement projects that enhance the lives of residents or contribute to sustainability in communities.

This year’s recipients are Colinton Fire and Rescue, Clearwater Regional Fire Rescue Services, Taber Exhibition Association, Société du Centre Communautaire Rivière-la-Paix, La Crête Agricultural Society, Misty Ridge Ski Club, Prairie Rose School Division (Margaret Wooding School), New Sarepta and District Agricultural Society, Dewberry and District Agricultural Society, Hope Haven Society, Willingdon & District Agricultural Society, Czar Curling Club, Griffiths Senior Centre, the Municipality of Crowsnest Pass, Duchess Agricultural Society, and the Bruce Sports and Stampede Association.

The next application period opens March 1. Eligibility requirements, application forms, and past projects can be found at the FCC website.

Meanwhile, another 17 Alberta communities have been awarded $2,500 grants from Canada’s Farmers Grow Communities Program, which is funded by the Bayer Fund.

The program received nearly 1,000 applications, with recipients (which are nominated by a farmer) chosen by a random draw.

This year’s winners are: Blindman Valley Agricultural Society, Blueberry District Rural Crime Watch Association, Elnora and District Museum, Falun Rural Crime Watch, Friends Of Lamont Elementary School, Grade Three Reading Academy Society, High Prairie Health Care Auxiliary, Lesser Slave Watershed Council, Lloydminster Exhibition Association, Lougheed And District Public Library, Newell District 4-H Horse Committee, Okotoks Food Bank Association, Rocky Organization for Animal Rescue, Rolling Hills Agricultural Society, Spruce Grove and District Agricultural Society, Vegreville Preschool Association, and Picture Butte Walk On The Wildside Society.

The 2020 edition of the program will open in mid-January with info and nomination forms at www.canadasfarmers.ca.

Finally, the Green Acres Dairy 4-H Club in Lethbridge is one of 10 recipients of the Saputo and Armstrong Cheese 4-H Dairy Club Fund. This new fund awards $1,000 to 10 4-H dairy clubs across the country each year.

The post Host of community organizations in Alberta receive funding appeared first on Alberta Farmer Express.

Michael Hoffort, the ag lender’s president and CEO, said FCC “will work with our customers to find solutions to any short-term financial pressure that might be weighing them down.”

Many producers were unable to complete their harvest due to rain and then snow.

“The last days of harvest normally represent a grain farmer’s profits for the year, so for many, what’s left of their paycheque for the year is still sitting in the field,” Hoffort said.

He didn’t specify what type of relief might be available, saying farmers under stress should contact the lender.

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“FCC will work with customers to come up with solutions for their operation and will consider deferral of principal payments and/or other loan payment schedule amendments to reduce the financial pressure on producers impacted by wet conditions,” Farm Credit Canada said in a news release.

“Customers in Alberta, northern and central Saskatchewan are encouraged to contact their FCC relationship manager or the FCC Customer Service Centre at 1-888-332-3301 to discuss their individual situation and options.”

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The move comes after a two-year review that included public consultation and meetings with producers and industry groups.

“The review found that there is strong need for AFSC’s financial support across Alberta aimed at encouraging rural development and meeting the needs of producers in today’s changing environment,” said Jennifer Wood, chair of the provincial Crown corporation.

In January, Agriculture Minister Oneil Carlier approved a new lending mandate focused on new entrants to farming, and producers wanting to expand their operations. Lending rules for agri-food processing and agri-food businesses have also been revamped.

“The new lending mandate focuses on supporting startups, scale-ups and intergenerational succession within the agricultural value chain and across rural Alberta,” said Wood.

As a result, the maximum lending limit for individual loans has been increased to $15 million (up from $5 million previously).

The increase was needed, in part, because of rising land prices, which have being going up by about 10 per cent annually during the last five years.

The organization has established five lending programs in the agricultural sector and one for small and medium-size businesses in rural areas.

One is a new lending program for young and new farmers.

“The Next Generation Loan Program is flexible and it’s a source of financing for new producers to establish their own operation,” said Wood. “In addition, there’s a young producer incentive, which provides borrowers with a one per cent interest rate reduction to lower the initial cost of financing.”

The corporation has also designed two long-term financing operations, which provide agriculture producers with fixed rate loans. Both the Developing Producer Loan Program and the Alberta Producer Loan Program also offer increased flexibility and more time for repayment.

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“The current debt-to-asset ratio in agriculture remains lower than the 10-year average… and farm liquidity remains healthy,” said JP Gervais.

A relatively low debt-to-asset ratio provides financial flexibility and represents lower risk, while liquidity reflects the ability of producers to absorb fluctuations in farm input prices, demonstrate patience with their marketing plans, or take advantage of unexpected opportunities, the farm lender said.

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The six-year-old program, sponsored by the Monsanto Fund, gives grants to schools, libraries, historical societies, health and recreational facilities, rural daycares, senior clubs, 4-H groups, food banks, and other community organizations. To be eligible, the organization must be supported by a local farmer.

One of the Alberta recipients is the Bay Tree Community Park Association, which will put its grant toward upgrading the local park and playground facility.

“I am a young senior and I can tell you that as a child I played on the equipment that is currently in the park,” said local resident Lurind Jeaneaux. “That’s a long time to go without any upgrades, so we are thrilled to receive this boost to our fundraising efforts.”

That project was supported by Bay Tree-area farmer Garth Thompson.

“A gift of $2,500 doesn’t seem like a lot, but from talking to some of the farmers and the charities themselves it can make a huge difference in their communities,” said Trish Jordan, public and industry affairs director at Monsanto Canada.

Other Alberta recipients (and the farmer(s) who supported them) were WINGS of Providence Society (William Heidecker, Calgary), Nose Creek Valley Museum Society (Terrie and Scott Copley, Crossfield), Ponoka & District Health Foundation (Dorothy Ungstad, Ponoka), Stettler Regional Child Care Society (Heather Rowland, Big Valley), Beaverhill Bird Observatory Society (Nathan Strilchuk), Leduc & District Emergency Shelter (Gordon Schneider, Beaver County), La Glace People Deterrent Citizens on Patrol (Nancy Schlauwitz, La Glace), Medicine Hat Youth Action Society (Nichole Neubauer, Medicine Hat), Wrentham Fire & Rescue Foundation (Kim Owen, Wrentham), Smoky River Palliative Care Society (Jules Aubin, Guy), Société Centre Communautaire De St. Isidore (Alain Lavoie, St. Isidore), Alix Agricultural Society (Carolyn Barritt, Alix), Trochu Playschool (Ernest Gelinas, Trochu), Community Association for Lasting Success (Wesley Antonchuk, Vegreville), Holden Agricultural Society (Maury Micklich, Holden), Friends of the Innisfree Library Society (Randy and Susan Cannon, Innisfree), and the Mannville Historical Society (Jim and Eileen Kitt, Mannville).

The 2018 edition of the program will be open for submissions in February. Farmers can submit an application for a charity in their area until the end of September.

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“They are larger, the amount of debt is greater, the fact that we’re not seeing a higher number doesn’t mean there isn’t considerable distress out there,” said Todd Langel, a lawyer with Faegre Baker Daniels in Des Moines, Iowa.

Speaking at the Grain World conference in Winnipeg on November 15, Langel said the factors causing insolvencies on most farms these days are generally tied to low commodity prices and a lack of knowledge of how to deal with shrinking margins.

“The U.S. producer has gone through a relatively recent period of profitability due to higher prices during the last cycle (five years ago) and that has allowed some producers who don’t have quite as sharp a pencil to continue,” he said.

The competition for North American farmers is also getting tougher due to cheaper production costs in South America.

However, Langel says Canadian farmers may have a few advantages over their counterparts to the south.

“I think that a number of Canadian producers are larger and have a greater degree of sophistication in some of the operations that may give them an advantage,” he said. “They also may pay more attention to risk management strategies.”

Another factor that is becoming more common is that an increased number of farmers are using corporate structures or limited liability companies to define their operations.

This may work to their advantage, but it also tends to muddy the true number of farms that may actually be going under, according to Langel.

“They may be using organizational methods that don’t tend to get put into bankruptcy,” he added.

According to Langel, what can often occur is the farmer may choose to simply dissolve the corporation or LLC as opposed to putting it through a court-monitored restructuring process.

The post Farm bankruptcies down, but not out – just different appeared first on Alberta Farmer Express.

But there are “a lot of other tax strategies” that farmers can use, say financial planning experts.

In July, federal finance officials announced proposed changes to the Income Tax Act that, if passed, will change the regulations around lifetime capital gains deductions, income splitting, and incorporating farms, among other things.

Critics — including a growing number of farm groups — have decried the changes as well as the 75-day public consultation process, which ends Oct. 2 while most farmers are busy with harvest or fall work.

Both Finance Minister Bill Morneau and Prime Minister Justin Trudeau have vowed to push ahead, saying the changes are about levelling the playing field for all taxpayers. But although the two politicians say the target is high-income earners, federal finance officials are also concerned about farm corporations.

“The government doesn’t like it when farmers are using their farming corporation as a pension plan as a way to defer taxation — it doesn’t see that as what it was designed for,” said Jean-Pierre Laporte, CEO of Integris Pension Management Corporation in Toronto.

“The government realized it’s losing a lot of tax revenue because that’s exactly how a lot of farmers have structured their affairs.”

That’s made the government keen on closing “what it perceived to be a loophole” and if the proposed changes go ahead, farmers will be affected, he said.

“Most of the time, farmers operate through a private corporation, and the tax changes are designed to impact how those private corporations are taxed in an adverse fashion,” said Laporte.

“Almost all of the farmers who have businesses that are incorporated will be impacted by these changes.”

But these changes are also “a good wake-up call” for producers, said financial planner David Derwin.

“This type of planning is all extremely important, but it’s not necessarily urgent,” said Derwin, an investment adviser at PI Financial. “Regardless of what happens, this process is going to be a good way to get people to think about what they should do for retirement planning.”

And in some cases, these changes will be the push producers need to “ask what else is out there” when it comes to their retirement planning.

“They can’t necessarily do what they did in the past going forward,” said Derwin. “There have been a lot of other tax strategies that have been made available for farmers that an RRSP or pension plan wasn’t necessarily the best tool to look at.

“There have been some opportunities that have been overlooked, but this is the time to look at the bigger picture and say, ‘How do these other tools fill a lot of those gaps?’”

Personal pension plans

And one of the most valuable — and underutilized — tools is a personal pension plan.

“If the idea is to shelter as much corporate tax as possible, there’s really no better way than a personal pension plan,” said Laporte.

A personal pension plan is a registered plan with fewer limitations and greater benefits than RRSPs or their company and government counterparts, he said. Those benefits include larger tax-deductible contributions, credit protection, tax-free intergenerational transfers, and tax-deductible corporate funding, said Laporte.

“Personal pension plans offer seven additional tax deductions at a corporate level that don’t exist when farmers use an RRSP to save for their retirement,” he said.

“The personal pension plan is a tool that addresses a lot of those issues with the potential tax changes,” Derwin added. “It addresses so many things — diversification, generating income, protecting your assets, transitioning from one generation to the next.

“There are some tax benefits, but even over and above that, these other things make them so flexible in longer-term planning.”

Despite the added benefits of personal pension plans, most farmers don’t currently use them, said Laporte.

Most people view pensions as something only available from the public sector and larger private sector companies, so the rules can seem overly complicated for small businesses such as farms.

“The path of least resistance means keeping it simple,” said Laporte. “A lot of farmers prefer the simplicity of just paying dividends to family members with no fuss, rather than going through the bother of setting up a pension plan.

“Now, though, they won’t have a choice. They’ll need to at least look at the pension solution if they want to avoid paying all this extra tax.”

It’s too soon to say whether the federal Liberal government will persevere or back down in the face of the growing backlash from farmers, doctors, and other small-business owners.

But ultimately, “the trend is toward more taxation,” said Derwin.

“Whether these tax changes happen this year or down the road, these pension plans are a good investment and a good planning tool in and of themselves,” he said.

“Even if the government doesn’t make dramatic changes, I think it’s a smart planning tool to look at.”

The post Worried about federal tax changes? There’s an alternative, say experts appeared first on Alberta Farmer Express.