BIGGER AND BETTER VERSUS SMALLER AND SMARTER
Originally published on April 26, 2001
I have the privilege of listening to some smart people.
One such person rang me up last month and vented over what he perceived as a growing obsession among today's farmers that "bigger alone is better."
In this farmer's circumstances, bigger was no longer better. He said that while he and his neighbor had the same capital to deploy, he was losing ground due to a lack of farm labor.
His neighbor had access to a retired father-in-law and two sons, while he had to make do with hired help. Each year, the hired help was getting tougher to find and so he has decided to shrink his 25-quarter farm. He said he would look for ways to get more for less. In his mind smaller was smarter.
Producing more value on fewer acres is a process known as "intensification." This new theory was profiled in the March-April issue of Saskatchewan Business. Sask Water president Clare Kirkland has been credited with creating the concept of "revenue per acre."
While I am usually skeptical of statistical generalizations concerning agriculture, this benchmark made me dig deeper.
Table one shows farm revenue per farmland acre, which includes all land in crops, summerfallow, pasture and Christmas trees.
At $88.05 per acre, Saskatchewan has the lowest revenue per acre. Newfoundland, with only 107,709 farmed acres, leads the nation at $680.97 per acre.
In table two we separate the province's farm cash revenue into crop and livestock components. Applying each of these revenue components to their respective acreages, we get roughly the same $100 per acre measure. Saskatchewan is again dead last.
"Tastad, this sounds good," you may be thinking, "but there's no intensification opportunities for us on our family farm. We're not in the irrigation region so we can't grow the seed potatoes that command the $1,500 to $3,000 an acre."
Intensification is easier said than done, but there are niches generating higher per acre revenue. This may be in fruit, forage seed, organic commodities or greenhouse vegetables.
Take Christmas trees for example.
In 1999, the Canadian Christmas tree industry generated $71 million in revenue.
This export-oriented industry ships about 98 percent of its product during November and December to the United States.
In 1999, Quebec sold almost $23 million worth of Christmas trees.
By comparison, Saskatchewan tree farmers sold only $15,000 worth of trees in 2000.
If you are pondering "bigger is better," maybe you should look at passing on those four quarters and price out a greenhouse and 300 Balsam fir seedlings.
Allyn Tastad, chartered professional accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at firstname.lastname@example.org or website www.hth-accountants.ca. All data and information provided is for informational purposes only. Readers are cautioned that laws and regulations are subject to change. Consult your accountant for current professional advice tailored to your situation.