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Investments as financial levers for farm businesses

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The agri-food sector is expected to contribute significantly to Quebec’s economic recovery. Now is the time for farm businesses to innovate and invest.

The pandemic didn’t spare the agri-food sector. Producers, primary input suppliers and processing companies all faced their fair share of issues. There were foreign workers shortages, supply chains disruptions (restaurants, hotels, schools) and decreased exports—all of which led to crop losses, production surpluses, lost sales and ultimately, lower revenues. In short, farm profits took a hit.

But at the same time, the buy local movement has taken off, leading to initiatives like Panier Bleu and triggering changes in consumer habits. Agrotourism also increased in several regions of the province (e.g., microbreweries).

Just 33% of the food Quebecers eat is grown in the province

The current situation has created an opportunity for local agri-food businesses to increase their market share. Recognizing the pandemic-driven spike in interest for local products, the Quebec government has allocated $157 million to increase the province’s food self-sufficiency through a number of measures, including adopting new technologies, acquiring equipment, making agricultural investments and promoting buy local initiatives.

Agri-food businesses need to make investments—like implementing robotization or automation to make up for labour shortages—in order to future-proof their operations. But these investments are often very costly. High debt levels can increase business risk and generate stress, especially for farmers who may also be involved in a business transfer or succession. And given how demanding it is to manage technological changes, business owners may have less time to spend on financial management.

Smart investments to ensure good financial health

Protecting your business’ financial health involves taking stock of your current situation and assessing the impacts of any investment projects before moving forward. In other words, look before you leap. Here are the key factors to consider:

  • Purpose of the project
  • Anticipated return on investment
  • Priority level compared with other projects
  • Actual cost
  • Tax impacts on profitability and debt levels
  • The latest financial aid programs

The new market reality and government support programs have created the right conditions for many agri-food businesses to modernize. But investments should be made thoughtfully. You want to take advantage of tax incentives and optimize revenues, while also ensuring that any investments are appropriate for your organization’s needs, lifecycle stage, business model and vision.

In addition to government assistance programs, some businesses may be eligible for R&D credits when they purchase or make specialized machinery.

Contact our experts for more information and transform your investments into financial levers.

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