The Commercial Agriculture and Farming Market
The term agriculture generally refers to the production of goods through farming. No universal definition exists for activities falling within the term farming. As a general guideline, the Farm Debt Mediation Act, a federal stature, defines farming as follows:
· The production of field-grown crops, cultivated and uncultivated, and horticultural crops;
· The raising of livestock, poultry and fur-bearing animals;
· The production of eggs, milk, honey, maple syrup, tobacco, fire, wood from wood lots and fodder crops; and
· The production or raising of any other prescribed thing or animal.
THE FARM MARKET
Registrants may be involved with a large 400-acres dairy farm that includes a main drive through, 200-stall dairy barn, several additional outbuildings, five large tower silos with a mixer and large feed room, milk parlour, robot milking and tanks listed at $6.5 million or asked to market a small specialty farm occupying five acres available for $175,500 or even a cash crop operation on 50 (36 workable) with a small house and mixing woodlot for $277,500.
Valuation in the marketplace can be challenging as each operation derives its value from many factors. Most, but not all, can be grouped under four criteria: location, land, building and other assets. Location factors including such things as proximity to the target market, accessibility by adequate roads and availability of services. However, other factors can also affect value such as proximity to large urban areas, distinctive property features and other rural amenities close to the property.
As a second consideration, land value is usually based on agricultural productivity with soil fertility being a primary consideration. Detailed maps are available though government agricultural services concerning spoil types, surface textures, soil materials (including soil profiles), drainage and topography. Further, the level of crop heat units (CHU_ is important not only for crop selection but also in estimating productivity, as warm-season crop selection but also in estimating productivity, as to maturity is generally dependent on temperature (along with moisture levels in the soil and soil fertility). A CHU indexing system is available through government sources for all agricultural areas in the province.
The type, age and condition of primary structures and farm equipment of an operating farm also affects value. Prudent capital investment in modern systems and processes can directly affect productivity, as warm-season crops have a wide range of maturitities. Crop development and time period to maturity is generally dependent on temperature (along with moisture levels in the soil and soil fertility). A CHU indexing system is available through government sources for all agricultural areas in the province.
The type, age and condition of primary structures and farm equipment of an operating farm also affects value. Prudent capital investment in modern systems and processes can directly affect productivity which, in turn, can translate into higher values. Further, dollars invested in regular maintenance and upgrading of property improvements can make farm operations more saleable and also boost value.
Other assets, not directly affecting productivity, can influence price. For example, farm quotas and government program/incentive payments relating to specific types of farming operations can enhance both value and saleability. Other improvements such as a large, well-appointed home and extensive landscaping, amenities and other visually attractive features will positively contribute as well. Lastly, other assets adding value would include maturing cash crops, livestock and/or machinery included in the sale, and improvements unique to the specific farming operation.
FARM QUOTAS AND MARKETING BOARDS
Many agricultural products are subject to regulated marketing in Ontario through marketing boards. Farm value can be significantly affected by whether or not a quota or production contract can be assigned at point of sale. For example, a dairy farm without a milk quota is of little value, even if it has first-class milk production facilities.
Registrants should include, in an agreement of purchase and sale for a farm, specific conditions providing for successful transfer or assignment from seller to buyer of any quota, entitlement or contract tht the buyer needs to market products for which the farm is being purchased. Specific marketing boards have their own transfer/assignment procedures and should be contacted directly for guidance.
Marketing boards, primarily governed by farmers, can be grouped under three categories based on their specific marketing plans.
The objective of marketing boards is to provide stability and predictability for both producers and buyers of specific commodities. The Ontario Farm Products Marketing Commission, an agency of the Ministry of Agriculture, Food and Rural Affairs (OMAFRA) oversees individual marketing boards to ensure that they operate within defined authorities.