ON-FARM INNOVATION ADOPTION
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1 ON-FARM INNOVATION ADOPTION Evidence from the 2013 Farm Financial Survey (FFS) OECD Farm-Level Analysis November th
2 Purpose and Context To provide results of the 2013 Farm Financial Survey (FFS) voluntary questions with respect to on-farm adoption of The information covers three areas: Producer attitude towards adoption of Factors and activities that play a role in the decision to implement or adapt on-farm Type of on-farm 2
3 On-Farm Innovation: Definition For the purpose of the survey Innovation means implementing a new or significantly improved product, practice or process on [a] farming operation. Innovation must be new to [the] operation but need not be new to the industry. 3
4 Over the last three years, approximately half of farms implemented some form of on their farm The s implemented between 2011 and 2013 consisted of new or significantly improved Production practices (34% of all farms) Crop and livestock products (33% of all farms) Approaches to marketing (21% of all farms) Business management practices (17% of all farms) 60% 50% 40% Percent of farms that implemented an on their farms between 2011 and 2013, by type of Larger farms are more likely to implement than smaller farms. Over two-thirds of farms with $1M in gross revenues or more adopted at least one between 2011 and Grain and oilseed farms had the highest share of farms innovating in approaches to marketing. This might be partly due to the fact that this data covers the transition period of the reorganization of the Canadian Wheat Board. On-farm 30% 20% 10% 0% 34% Production practices 28% Crop and livestock products 21% Approaches to marketing 17% Business management practices 48% Any type of Source: Statistics Canada, 2013 Farm Financial Survey Note: Production practices (e.g. soil management, fertilizer application, livestock handling, irrigation and water management, grain fed beef, organics, GPS - precision farming); Crop products (e.g. variety planted, cultivar created) and livestock products (e.g., type or breed raised); Approaches to marketing (e.g., types of contracts, futures or options, direct marketing); Business management practices (e.g. approaches to labour requirements, business 4 ownership/partnerships, acquiring inputs, new processing activities).
5 The majority of farms wait until at least a few others have tried an before adopting it themselves When it comes to the implementation of a new or significantly improved product, practice or process on the farm, most farm operators wait until a few others have tried the it first (43%) or until it has been well tested (32%). Another 17% of producers are among the first to try something new, while 8% see themselves to be the last to adopt something new. Question: When it comes to the introduction of new or significantly improved products, processes or practices, does your operation tend to be: Be among the first to try something new Wait until at least a few others have tried it first Wait until it has been well tested Be among the last to try something new 8% 17% 32% 43% Attitude towards adoption of Source: Statistics Canada, 2013 Farm Financial Survey 5
6 Producers operating larger farms are more likely to be early adopters of on-farm In 2013, 84% of producers of million dollar farms report being early adopters of in comparison to only 47% for those operating farms with revenues of less than $100K. Larger farms tend to be more profitable and operated by full-time farmers and thus, less likely to be operated for lifestyle reasons. Larger farms also generate the bulk of total production in Canada. Question: When it comes to the introduction of new or significantly improved products, processes or practices, does your operation tend to be: 53% Early Adopters 44% Late Adopters 33% 16% Similarly, producers operating smaller farms are more likely to be last to try something new as compared to larger farms. 47% 56% 67% 84% $25,000 to $99,999 $100,000 to $249,999 $250,000 to $999,999 $1,000,000 and over Share of Farms 31% 26% 32% 11% Share of Sales 3% 8% 32% 57% Attitude towards adoption of Gross Farm Revenues Source: Statistics Canada, 2013 Farm Financial Survey 6
7 Multigenerational farms are more likely to be early adopters of on-farm Farms operated by both young and older farmers* are more likely to include a large share of early adopters in comparison to farms operated either solely by young operators or older operators. Question: When it comes to the introduction of new or significantly improved products, processes or practices, does your operation tend to be: Early Adopters Late Adopters Multigenerational farms tend to be larger farms with potentially greater means to take on more risk. 31% 26% 43% Farms operated by solely young operators are more likely to be in their first years of operation and have significant debt, yet they are more likely to innovate and be early adopters. 69% 74% 57% Operated solely by young farmers Operated by young and older farmers Operated solely by older farmers Share of Farms 7% 11% 82% Share of Sales 7% 24% 69% Source: Statistics Canada, 2013 Farm Financial Survey Attitude towards adoption of * Young farmers are under 40 years of age and older farmers are 40 years of age and older. 7
8 Early adopters of on-farm are more likely to take on greater financial risk Farm operations with higher debt-toasset ratios are more likely to be amongst early adopters in comparison to farms with the lowest debt-to-asset ratios. Question: When it comes to the introduction of new or significantly improved products, processes or practices, does your operation tend to be: Early Adopters Late Adopters The majority of farms (69%) have a low debt-toasset ratio (under 0.20) and very few farms (2%) have a much higher debt-to-asset ratio (over 0.80) 45% 32% 27% 21% 22% Larger farms, which are more likely to be early adopter, also tend to have greater debt-to-asset ratios and invest more in on-farm than smaller farms. Farms operated by solely young operators are more likely to be in their first years of operation and have significant debt, and thus, a higher debt-to-asset ratio, regardless of farm size. 55% 68% 73% 79% 78% <=0.20 >0.20 & <=0.40>0.40 & <=0.60>0.60 & <=0.80 >0.80 Attitude towards adoption of Share of Farms 69% 19% 8% 3% 2% Share of Sales 51% 26% 14% 5% 4% Debt-to-Asset Ratio Groups Source: Statistics Canada, 2013 Farm Financial Survey 8
9 The financial impacts are important factors for most farmers in deciding to implement an In the last three years, , how important have the following factors been for making a decision on implementing or adopting new or significantly improved products, processes or practices? Impact on costs (e.g., initial costs, on-going costs) Impact on revenues (e.g., yield gains, better quality, better price due to novel product) Essential/Important 75% 83% Moderate or little importance 17% 25% Benefits for work/family balance 72% 28% Environmental benefits 64% 36% Level of risk of the compared to current practice Availability of information to assess the value of the for your farm 62% 61% 38% 39% Access to financial resources to implement the 59% 41% Important factors in deciding to implement an are the impact on costs (for 83% of farms) and revenues (for 75% of farms). Non-financial benefits (i.e. work/family valance and environmental benefits), were important for 72% and 64% of farms, respectively. Factors related to operationalizing implementation (i.e. level of risk, available information, and access to financial resources), were important for between 62% and 59% of farms. These factors tended to be more often important for larger farms, than smaller farms. 9 Factors
10 When deciding on implementing an, it is important for many farmers to seek advice and information from their peers In the last three years, , how important have the following activities been for making a decision on implementing or adopting new or significantly improved products, processes or practices? Relying on own experiences Obtaining advice and information from fellow farmers based on their experiences Obtaining information from input companies (e.g., seed and feed dealers) Reading detailed technical and financial information Attending demonstration farms and field days to observe the implemented Attending workshops, seminars, meetings, conferences Seeking information from regional specialist/ extension officers Seeking information from independent consultants Essential/Important 91% 68% 56% 53% 42% 41% 38% 38% Moderate or little importance 58% 59% 62% 62% 44% 47% 32% 9% It is essential or important for the operators of more than two thirds of farms (68%) to seek out the knowledge and experience of fellow farmers when deciding on implementing an. Obtaining information from suppliers is also important for a majority of farmers. Attending demonstration events or workshops, or seeking information from specialists and consultants was identified as important by less than a majority of farms (38%). However, it needs to be noted that the information provided by these events and experts is often obtained nonetheless indirectly, through various forms of media and discussion with peers and suppliers at various points of the decision making process. Activities 10
11 Summary The 2013 FFS results on on-farm s indicate that: The majority of Canadian agricultural production is generated on farms that innovate early, since large farms are most likely to be the first to try something new or be early adopters. Farms with young operators are more likely to adopt and be early adopters, compared to those solely operated by older operators. However, few farms have only young operators, which are under 40 years old. When deciding whether to implement an, economic factors (e.g. reduced costs and or increased revenues) are essential or important factors for most farms. Seeking out information and advice from their peers is important for a majority of farmers. Events and regional specialists provide information to the farmers seeking them out, and in addition disseminate knowledge to farmers through various media. 11
12 Policy Implications What are the key enabling roles of governments? Governments can: Support research of promising innovative products, practices and processes, including the analysis of economic implications Support the development and testing of new technologies to give confidence that they work (e.g. show results of testing, demonstration days). Ensure that research on s is directed toward areas that increase competitiveness by saving farmers time and money and/or generate greater profits, otherwise, less likely to be adopted. Support early adopters by helping to reduce financial and other risks Early adopters are vitally important in incenting adoption of on-farm among their peers; but they also take on more risk than farmers who wait and see if it works first. Ensure financial support and access to information is available to the innovators and first adopters of innovators, to reduce risks and costs of early adoption. Support the implementation and use of knowledge sharing networks Given the importance of farmer-to-farmer sharing of experiences in adopting s, various communication tools and opportunities should be supported. Governments need to have an up-to-date understanding of the effectiveness of various communication tools, including social media, as well as hands-on and face-to-face demonstration, and be aware of differences among farmers. 12
13 13
14 ANNEX A Innovation Type by Farm Type Table 1. Percent of farms that implemented on their farms between 2011 and 2013, by type and farm type. (a) crop or (b) livestock product (c) production practices (d) approaches to marketing (e) business management practices Any type of Grain & Oilseed 32% 38% 29% 18% 53% Potato 45% 59% 25% 25% 68% Fruit & Vegetable 30% 34% 14% 21% 49% Greenhouse & Nursery 35% 31% 21% 33% 55% Dairy 32% 37% 9% 20% 50% Beef Cattle 24% 29% 14% 12% 42% Hog 24% 35% 19% 16% 50% Poultry & Egg 17% 32% 13% 15% 45% Other 18% 18% 13% 13% 35% Grand Total 28% 34% 21% 17% 48% Potato farms are the most likely to adopt any type of (68%), followed by greenhouse and nursery (55%) and grain & oilseed (53%). Potato farms are also the most likely to adopt s in (a) crop products (45%) and (c) production practices (59%). This may also be a reflection of farm size structure, as the great majority of potato farms (84%) have $250,000 and over in gross farm receipts. Amongst the livestock farm types, dairy farms are the largest adaptors of s in all types except for (d) approaches to marketing, where hog farms have the highest share of farms innovating (19%). In Canada, the Dairy Products Marketing Regulations, made pursuant to the Canadian Dairy Commission Act, provide federal jurisdiction over the marketing of industrial milk and dairy products. 14
15 ANNEX B Innovation Type by Province / Region Table 2. Percent of farms that implemented on their farms between 2011 and 2013, by type and province. (a) crop or (b) livestock product (c) production practices (d) approaches to marketing (e) business management practices Any type of Atlantic 26% 33% 12% 16% 45% Quebec 26% 32% 13% 13% 43% Ontario 27% 33% 17% 15% 47% Prairies 29% 35% 26% 19% 51% British Columbia 28% 29% 12% 18% 50% Grand Total 28% 34% 21% 17% 48% Adoption of by province or region is, to a certain extent, a reflection of the adoption rate within the predominant farm type and farm size distribution of that respective province or region. For example: The Prairies have a high share of grain & oilseed farms and has the highest share of farms adopting approaches to marketing s (26%) possibly due, in part, to the changes implemented with the Marketing Freedom of Grain Farmers Act implemented during that period of time. Quebec and Atlantic Canada have the lowest share of farms innovating in crop or livestock products (26%) with Nova Scotia, and its predominance of fruit and vegetables and dairy farms, reporting the lowest share amongst all provinces. British Columbia, where half of operations are beef cattle and fruit and vegetable farms, has the lowest share of farms implementing production practices (29%) and approaches to marketing s (12%). However, greenhouse and nursery farms in BC are amongst the most innovative in the country for any type of. 15
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