Bigger is Better – In agriculture why is growth seen as a detriment to the industry? Why do we want to see others fail?
To be clear off the start, bigger is not better; better is better.
Lately, I have seen articles and blogs about farm consolidation and its effect on agriculture. Growing up on a 4,000-acre grain farm that did not run the latest and greatest machinery and often relied on next year’s crops to pay for last year’s inputs;I feel that my viewpoint is strong from both sides as I now am a part of a 30,000-acre grain farm with numerous employees and ample opportunities. While I saw my neighbours growing up as competitors; I always respected what they were doing and how they were doing it.
If you are not growing, you are going backwards
The math is simple, with inflation at some of the highest levels in history, if you are not growing at a rate higher than inflation, you are going backwards. Now growth does not always have to be in terms of acres. With rising land prices, growing in other diversified areas such as seed growers, custom storage facilities or agronomy services. These are just a few ways operations can grow economically and not just overpay for competitive land. For example, Maverick Ag is a diversified growth operation of Hebert Grain Ventures.
As generations continue, growth is a necessity
I have seen thousands of financial statements in my life. Truth is, 3,000-acre farms will never be multi-generational farms. At an average profit of $50 per acre (which is where the benchmarks often fall out), the 3,000-acre grain farm makes $150,000 yearly to pay for principal, personal drawings, and reinvestment. This may be enough to adequately cover a single family, but if succession or transition is in the plan, growth is a necessity.
Most of my consulting is 5,000-acre to 20,000+ acre operations. The per-acre profits of many smaller operations are close to larger operations or, in some cases even stronger. While bigger is not better; better is better, the math does not lie. A 5,000-acre grain farm makes $100 per acre; it is $500,000 profit. A 40,000-acre grain farm makes $50 per acre; it is $2,000,000.
In the end, as family farms run through generations, growth is required whether we like it or not.
Farm consolidation is not killing the industry
This is my largest issue with current articles and farm outlooks. During the summer, we always have an event with our team; this year we chose to go golfing and then have supper with all of the families afterwards. As I sat down with my meal, I couldn’t help but look around and marvel at what our team had built. We had over forty people with more children than I could count.
Farm consolidation is not killing the industry. In many aspects, it is creating jobs and allowing many people to be part of agriculture that may not have had that chance otherwise. Whether we pull employees from other industries (mining, oil and gas) or bring on retired producers or farmers that decided not to remain as entrepreneurs, our team is agriculture. It would be an insult to tell them they are not as important as farmers who farm their own acres. Labour is a huge issue in agriculture since we fail to treat our farm labourers as important as other occupations. One of our main priorities as business owners is to change this mentality.
I didn’t intend to write this as a rebuttal, even though as I finish this conclusion it feels like I am trying to stick up for myself and those that believe in a growth mentality. I applaud those who don’t want growth and are happy with their situation. Many individuals never get to that point where they can be truly content with what they have. I also applaud those who want to continue to grow because this mindset will keep you moving forward. The point is there is no right or wrong. The large-scale farms are no more right than the smaller operations. The pie in agriculture is extremely large, and we can all have a piece the size we want.