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The farming industry is as strong and vibrant as ever. But to ensure ongoing success, one must evolve to better manage the pressures and increased risks you may face. A new business model many of our grain growers are considering is amalgamating with a number of other families / producers to form a ‘mega farm.’
Choosing to operate as a mega farm can lead to numerous benefits. Perhaps the biggest advantage is the ability to strengthen overall management and pool key resources. To effectively manage a farming operation day-to-day, farmers require skills and experience in more than just agriculture, including marketing, operational issues, finance and human resources.
In sharing management duties, there is an opportunity to determine which roles are required and develop the skill sets necessary to carry out those roles. The members of the mega farm can then be matched to the positions that suit their unique abilities and experience. This approach not only improves success in the various areas of farm management, it also reduces the stress on each individual farmer to perform all of those duties well.
Another advantage of a mega farm model is the pooling of capital and other resources such as equipment and labour, to help reduce outputs. If the members of the mega farm are spread out geographically across the province, it also allows each member to diversify. The ability to grow a variety of crops helps reduce risk, allows farmers to rotate crops and manage their land more effectively.
The mega farm model is also getting attention as it addresses one of the biggest challenges on the Western Canadian land base today—our aging population. Many farm families do not have children who want to take over the farm, but many families still want to maintain ownership of the land. To do that, they need a good rate of return. Renting the land to a mega farm is an option that reduces the cost of farming and would help keep the land in the family.
Setting up a mega farm has to be done properly to ensure the tax structure is efficient and core components of the business—including a capital plan, buying inputs, selling commodities, day-to-day operations and a human resources manual— are in place along with a trained management team to oversee them.
The game has changed and as a result, business models need to change too. By looking at farming in a new way, western producers have the opportunity to start exploring amalgamation and potentially develop a competitive edge over other jurisdictions.
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