Smaller farms need to consider niche markets says report's author

Wednesday, December 11, 2013

by SUSAN MANN

The most viable farms are ones with annual gross revenues of $250,000 to $400,000, according to a recently released Conference Board of Canada report.

Smaller farms have constant problems with profitability, says the report’s author, Michael Grant, director of research for the Conference Board’s Centre for Food in Canada. The report is called Funding Food: Food and Capital Markets in Canada.

But Grant says they’re not recommending all farms necessarily need to get bigger. Instead, there’s room in the food system for smaller farms, which “do better in areas where they produce specialized products where the market will pay more.”

Strategically, farmers need to make a decision as to whether they want to be in a commodity market versus a more specialized market. For example, a southern Ontario pork producer who has found a way to get Omega 3 fatty acids into his pork has taken a commodity product, pork, and turned it into a higher valued added, specialized product. “In those situations, those smaller farmers can basically make more off their revenue. It becomes more profitable for them,” he says.

But for small farms producing just commodities “it becomes much more difficult for them to make a profit,” he explains. “If you’re going to be small, I think the message is you have to be niche and you have to find some way of having higher value added products that the market will pay more for.”

For larger farms they’re more likely to be viable because they have scale, he notes. “The larger farms, especially for instance in grains, they really do rely a lot on their scale.”
 
It’s a lot like what is happening in the retail system, which has big box stores and smaller, niche type establishments. The small niche stores are still viable in the sense that they can continue in operation and they make a profit, he says. “Not everybody has to be a Walmart.”

The smaller niche establishments maintain their viability by charging more for their products and they have other advantages people like, such as good service and products unavailable in big box stores. “The same thing is true for farms. Where else are you going to get the Omega 3 fatty acids in a pork product?” he asks.

The Centre for Food in Canada is a three-year project of the Conference Board, which is an independent, evidence-based, non-profit applied research organization. The Centre for Food has produced almost 22 reports looking at various aspects of the food system, such as the economic viability of farms, health, and food safety. The centre is almost finished its three-year mandate, Grant says. BF