How to enter the agricultural sector

Ian and Diana Zeeuw discuss becoming a farmer.

BusinessesForSale: What inspired you to start the business?  

Diana deZeeuw: My husband and I share a love of animals. We bought our 220 acres primarily because it was a great place for our animals and birds to be. Gradually the business developed.

BFS: How can people get into the agricultural sector and find farms for Sale?

DZ: They will need to register their business and be assigned a business name and number. 

They should also consider setting up an HST account. This is not required for businesses that gross less than $30,000, but there are many advantages for farms in particular to having a HST account. 

For example, much of what farmers sell is tax-exempt but they can claim tax credits for what they buy for their farm. In many cases, a HST account is optional if gross income is below the minimum requirement but is generally advantageous to farmers.  

Livestock farmers have definitely seen prices fall more than those selling grain crops, and fears regarding disease such as BSE have stifled exports

They may be able to join one of the farmers’ organizations such as OFA or the Christian Farmers Federation. They will need to conform to local municipal regulations, regarding housing livestock in particular.

Sometimes planning bylaws restrict development on land depending on zoning. There are special guidelines for farmers raising animals for dairy or eggs; they must abide by quotas, sanitation requirements and so on.

BFS: Any tips relating to raising finance?  

DZ: Submit a business plan to Farm Credit Canada with an application for funding. You can also approach your local development corp or even the Business Development Bank. 

Some regular banks have farm loan departments as well and you can attempt to secure private funding. Some countries offer more subsidies than Canada to new and existing farmers

BFS: Which area of agriculture is the most lucrative do you think, now and in the future? 

DZ: Overall, growing grain crops seems to be more profitable. The energy industry is demanding alternatives to fossil fuels, and the public is striving to be more self-sufficient with their food production.

BFS: How much has the sector been market affected by the downturn? 

DZ: Some sectors have been affected more than others. Livestock farmers have definitely seen prices fall more than those selling grain crops, and fears regarding disease such as BSE have stifled exports.

BFS: How recession-proof is this sector?  

DZ: The demand for farmland seems to be strong as society as a whole seeks to become more self-sufficient with their food supply. The federal and provincial governments do offer guaranteed income programs to farmers to protect them against dips in market prices. 

Farmland holds its value. Many investors see it as a hedge against inflation. Food is a necessity that will be purchased even if consumers forego buying other items.

BFS: What are the biggest challenges for the modern farmer?  

DZ: Affordable financing can be a real obstacle. Farm construction, equipment, livestock, vet care, feed can all be extremely expensive. 

New farmers should ensure they have an economical line of credit in place before they start growing their businesses. Often buying an existing business is much easier to manage financially than trying to start a new one, or resurrect a defunct one. 

BFS: How important is it for entrepreneurs to have previous experience in the industry? 

DZ: One can learn as you go, which is what we did, but the more first-hand knowledge a farmer brings into the operation, the more likely he or she is to avoid making sometimes fatal errors – especially true when it comes to raising livestock. [to find out more, read about the McDonald's cattle farm]

BFS: Why, in your opinion, do some farm businesses fail?  

DZ: Taking on too much debt is very debilitating, and equipment in particular can be a huge expense. Some good farming businesses fail, not because they are not making a go of it, but because even though they are successful they are not successful enough to cover their debt obligations.

BFS: What salutary lessons have you learnt running Noah’s Farm?  

DZ: We built our farm from scratch on a large parcel of vacant land. It turned out to be a very costly endeavour as we had to buy everything outright on top of covering our initial construction costs – equipment, livestock, supplies, etc. 

Finding a reasonable source of farm financing has been our main obstacle. We have a good residential mortgage but it only covers the value of the house with a few acres. 

We've had to finance all the rest – barn, workshop, greenhouse, land and improvements – through other means.  

BFS: Any advice for would-be farmers?   

DZ: Firstly, start off with a solid business plan based on an evaluation of need in your area. Secondly, if you know you will require a source of funds, line it up before you start by presenting your business plan to, and receiving approval from, a farm-related financial institution. 

And my third piece of advice: buying an established farm is usually more financially feasible than trying to build a new one – even if you plan to adapt it to match your own unique plan.