The aim of this chapter is to present the results of the study, including findings concerning the direct, indirect and induced impacts of agriculture and agriculture-related businesses on the Huron County economy. This chapter will include an in-depth examination of the backward and forward linkages of agriculture-related businesses.

This research focuses on the economic impact of the agriculture sector and, more specifically, agriculturally related businesses in Huron County. Both primary and secondary data collection was undertaken; the primary research collection was an "input-output-like" survey approach and in-depth case studies with agriculture-related businesses. Further calculations of the induced and direct impacts were completed, based on Population Census of Canada data and, to some extent, on multipliers from other studies. The final analysis of the data illustrates that the agriculture sector is extremely important to the Huron County economy.

The aim of the study was to identify the total economic impact of the agriculture sector in Huron County. While published data show that farm gate sales were the largest for any county in the province of Ontario and that Huron County was one of the most productive agricultural areas in the province, there was no evidence to prove the actual impact of the agriculture sector. Similarly, published data showed that direct employment in agriculture for 1991 continued a downward trend. From this information, most people predicted this decline would continue while employment in other sectors would grow. Given this trend, estimates of some aspects of employment patterns in Huron County were made. Through a profile of Huron County, the direct impact of the agriculture sector was illustrated in employment data for the economy, which illustrated growth and decline industries for the county. However, this did not provide the full story of the economic impact of agriculture to Huron County. To provide a clearer picture of the indirect economic impact of the agriculture sector of the county, the input-output-like methodology was applied.

In 1991 the agriculture sector contained 4,845 employees (Cloutier, 1997). This number includes farm owners, operators and labourers. From this number, extrapolations provided an estimate of agriculture employees for 1996 by using the percentage change between 1986 and 1991. The estimated number of employees in the agriculture sector in 1996 is 4,428.

The indirect impacts of agriculture refer to the impacts (i.e. value of sales and number of jobs) created by agriculture-related businesses. An agriculture-related business is defined here as any business, which sells to, or buys from, the agriculture sector. This study found that the value of indirect impacts created by agriculture-related businesses is substantial.

5.2.2.1 Location of Agriculture-Related Businesses in the Survey

Agriculture-related businesses are located in rural areas, villages, towns and cities in every township across Huron County. Greater representation is found in and around Brussels, Goderich, Exeter, Seaforth, Lucknow, Wingham, Walton, Blyth, Clinton and Zurich. A limited number of agriculture-related businesses were found in and around Ashfield, Auburn, Crediton, Ethel, Kirkton, Lucan, Varna and Wroxeter.

The study found that Brussels has a concentration of construction and retail businesses serving the agricultural sector (according to 27 businesses surveyed). The town of Goderich hosts a relatively large number of agriculture-related businesses in the construction, transportation, retail trade and agriculture service industries (based on 33 surveyed businesses in Goderich). Wholesale trade industries serving the farming community are well represented in Exeter (based on 22 surveys). There is a relatively high number of manufacturing, wholesale and agriculture related service industries in and around the town of Seaforth. Finally, Lucknow has a good representation of wholesale industries with agriculture-related sales.

Most (86 per cent) of the agriculture-related businesses surveyed in the county have only one business location. Ten percent of the businesses surveyed have outlets located inside Huron County. Thus, a business in this category may have its head office in Goderich and an outlet in Exeter. Four percent of the businesses surveyed have outlets both inside and outside Huron County. These typically have larger sales, employ more people, and have head offices located outside the county.

5.2.2.2 Characteristics of the Businesses Surveyed

The common characteristic with all of the businesses surveyed is that they deal in some way with the agricultural sector. More specifically, all of the surveyed businesses buy products and services from, and/or sell products and services to agricultural producers. It is important to note that these same "agriculture-related businesses" may also have trade with other sectors of the economy.

For the purpose of this study, the surveyed businesses were categorized according to their primary activity. This was done using a categorization method set out by Statistics Canada. Statistics Canada separates Canadian businesses into eighteen divisions or sectors, such as "Manufacturing", "Retail Trade" and "Agriculture and Related Service Industries".

As illustrated in Chart 7, this study surveyed businesses in twelve of these eighteen sectors. This suggests that the agriculture sector has links with almost every sector of the Huron County economy. Connections were found between agriculture and the following sectors: Mining, Manufacturing, Construction, Transportation, Communication, Wholesale Trade, Retail Trade, Real Estate and Insurance Agent Industries, Business Service Industries, Accommodation, Food and Beverage Industries, and "Other Service" Industries. Linkages were also found among businesses classified as Agriculture and Related Service Industries.

Source: Agriculture-related business survey.

The study did not include businesses in the following sectors: Fishing and Trapping, Logging and Forestry, Finance, Government Service, Education, or Health and Social Service Industries. This does not necessarily mean that these industries are not linked to agriculture as they may sell to or buy from agriculture directly. In general, the service industries in this group support the workers and families in agriculture and related industries. More analysis of these particular industries may illustrate agricultural linkages.

Some of the industries analyzed in the study have comparatively stronger linkages with the agricultural sector. Of the total 220 businesses surveyed, high representation of agriculture-related businesses are found in manufacturing (27 businesses surveyed), construction (36), transportation (16), wholesale trade (47) and retail trade (31). Businesses within the agriculture sector are also making strong linkages with other businesses within that sector (32). Characteristics of the businesses surveyed in various sectors of the economy are discussed below.

The study found that strong linkages exist between businesses within the agriculture sector in Huron County. For example, both farms and nurseries are categorized as two types of agricultural producers. When a livestock farm provides manure to nurseries for their production of horticultural crops, a linkage has been made between two businesses in the agriculture sector.

More significant linkages are found between farmers and businesses that provide agricultural services. For example, veterinary offices and farm animal breeding specialists provide important inputs to livestock farms in Huron County. Linkages are also made with businesses providing agricultural crop services. These specialize in crop dusting and spraying, soil preparation, planting, and cultivating, harvesting, baling and threshing activities. Agriculture management and consulting services are also important inputs to the agriculture industry, but are not represented in this study. In total, 32 businesses either producing agricultural products, or directly serving the agricultural sector, were surveyed in the county. A typical example is the Goderich Veterinary Clinic, which divides its time between large and small animals.

A number of businesses within the Huron County mining industry provide inputs used by the agriculture sector. Mining businesses such as sand and gravel pits provide aggregate for use on the farm. The second category includes a salt mining operation that provides salt for feed to livestock owners. Seven such businesses in the mining industry were included in the study. An example is Bothwell Ltd. in Dungannon.

Huron County businesses manufacture a variety of products linked to the agriculture sector. A significant forward linkage involves agriculture products provided to the food industry for manufacture. Food industry activities in Huron County include abattoirs, bakeries, creameries, and the killing, dressing and packing of poultry products. An example of a non-food output from the agriculture sector is animal skins, which are used by tanneries in their production of leather goods.

The most important backward linkage between agriculture and the manufacturing sector is the production of farm machinery and farm equipment by businesses in Huron County. These and other Huron County manufacturing businesses are well represented in the study (27 surveys). An example is Promat in Seaforth, which produces mattresses for cattle.

The construction industry includes building, developing, general contracting and other establishments involved with the construction and development of commercial and residential buildings. Agricultural producers in Huron County use the construction industry for building water mains, sewers and drains on their farmland. They also require experts to drill or dig water wells, install and repair water well pumps and well piping systems. Other agriculture-related services provided by the construction industry include septic system installation, excavation and grading, and concrete pouring and finishing. There is also a large number of plumbing, heating and electrical businesses involved in the agriculture industry. Thirty-six construction industries with linkages to the agriculture sector were found in the county.

There are many transportation businesses linked to agriculture. These provide general freight, bulk liquids and dry material trucking. Typically, these involve local and long-distance trucking of livestock, manure and other agriculture products. Sixteen businesses were surveyed in this industry. An example is a transport company in Goderich that transports agricultural products locally as well as internationally.

Only one business in the communication industry was included the study. This business is a telephone carrier providing communication services to farm operations.

There exist in Huron County a relatively large number of wholesale dealers providing inputs to the agriculture sector. A majority of these businesses sell farm supplies to farm operations and farm equipment dealers. Typically, this includes commodities such as machinery, equipment, feed, seeds and chemicals. Businesses dealing in new or used farm machinery, equipment, supplies, parts and repair are particularly well represented in the area. Examples include 21st Century Dairy Equipment in Walton and Becker Farm Equipment in Exeter.

Establishments included in the retail trade sector are primarily engaged in buying commodities for resale to the general public for personal or household consumption, and in providing related services such as installation and repair. These same businesses also sell products to farmers for use on the farm operation, but are classified as retail since their main activity is selling products for personal use. The strongest linkages between the retail and agriculture sector are found in automotive sales and service, including gasoline stations and motor vehicle repair shops. This industry is represented by 32 businesses in the study. DeJong Auto Repair in Brucefield is a typical business that sells and services farm vehicles.

Services provided by insurance and real estate agencies provide important inputs to the agriculture sector. The main agriculture-related activity of a real estate agent is the selling of agricultural land. They are also involved in the leasing and brokerage of farm property and in providing written appraisals to farmers on demand. Insurance is also an important agricultural input to the farming community. Ten insurance and real estate agencies were surveyed for the study. Examples of businesses in this category include J.J. Talbot Realty in Goderich and West Wawanosh Mutual Fire Insurance Company in Dungannon.

Business service industries include accounting and law firms that provide financial and legal services to farm operations. Five such businesses were surveyed in the study.

Only one business in this category was involved in the study. This was a hotel that provides accommodation and other services to farm operators and their employees. The percentage of their total sales related to agriculture was, in fact, quite small.

There are three important businesses with linkages to the agriculture industry included in the sector referred to by Statistics Canada as "Other Service Industries". These include machinery and equipment rental and leasing businesses that provide important inputs to the agriculture sector. The second type of business with links to agriculture includes welding shops that repair farm machinery and equipment. Finally, auctioneers provide services for livestock and farm owners. Five such businesses were included in the study.

5.2.2.3 Importance of the Agriculture-Related Businesses Surveyed

This study measures the importance of a business through its total gross sales per year and through the number of full-time equivalent employees at the business. This provides an assessment all the economic activities of the business, regardless of whether or not they are related to agriculture. For example, a plumbing and heating business may serve both residential and agriculture producing customers. The total gross sales of this business would include both agriculture-related and unrelated sales.

All of the businesses surveyed had some sales related to the agriculture sector. Each business owner was asked to estimate the percentage of total gross sales that can be attributed to the agricultural sector. For example, if a business has $500,000 in total gross sales per year; and the owner estimates that 50 per cent of these sales are agriculture-related; then the total agriculture-related sales for that business would be $250,000.

The importance of a business is also measured by number of full-time equivalent employees. This information was gathered for the business location, as well as the business outlets. An assumption of this study is that the percentage of sales related to agriculture is related to the percentage of employees working on agriculture-related activities. For example, if the plumbing and heating business mentioned above employed 20 people, it would be assumed that 10 people (50%) work on activities to provide goods and services to the agriculture sector.

Seventy percent of the businesses surveyed provided sales data (154 of the 220 businesses). Statistics Canada classifies a industry with less than $5 million in sales as a small business. A medium-sized business has sales between $5 and $25 million per year. Businesses with sales above $25 million are considered large.

By this classification, businesses related to agriculture in Huron County are generally small in size. Half of the businesses surveyed had sales under $500,000. This study found that agriculture-related businesses have a wide range of sales, with some very high sales. The average total gross sales for the 154 businesses that provided sales data are $4,240,865. Only one businesses had sales over 100 million, while the top quarter had sales over $1.7 million. The total gross sales for all businesses surveyed in the study, including sales related and unrelated to agriculture, was $653,093,350 for 1996.

On average, the businesses in the study attributed 67 per cent of their sales to the agricultural sector. The average agriculture-related sales for the 154 businesses surveyed are $3,498,067. Total agriculture-related sales for all the business surveyed in the study was $538,702,420 for 1996. There were a number of businesses with very high agriculture-related sales figures. One quarter of the businesses surveyed had agriculture-related sales over $1 million per year. Approximately half of all the businesses surveyed had agriculture-related sales below $200,000.

Source: Agriculture-related business survey.

The manufacturing companies interviewed are also heavily influenced by the agriculture industry in Huron County. The average total gross sales for surveyed manufacturing businesses serving the agriculture community are $3.5 million per year. Approximately 70 per cent of these sales are attributed to the agriculture sector ($2.3 million). This information was derived from the twenty manufacturing companies that provided sales information for the survey.

Transport companies surveyed in Huron County depend on agriculture for 68 per cent of their Average total gross sales for these businesses is $3.4 million dollars, with average agriculture sales of $1.5 million for all the businesses surveyed (8). Liquid ammonia nitrate, bulls, cows, steers and weaner pigs are some of the examples of agriculture products shipped locally and exported by the trucking industry. This information is derived from the eight transport businesses surveyed for the study that provided sales data.

Retail stores typically sell products for household use, but, according to the 32 retail businesses surveyed, many also sell products to the agriculture industry. Approximately 50 per cent of the sales of the retail businesses surveyed are agriculture-related. Average gross sales for the 21 businesses surveyed are $2.6 million per year, with agriculture-related sales averaging $1.3 million.

Average gross sales for the surveyed agriculture and related services businesses are $1.5 million per year. In fact, the average sales for these industries are an unreliable way to understand the nature of most of the businesses in this sector. This is because the average is greatly affected by a couple industries with very large sales. Approximately forty percent of these businesses have sales less than $500,000.

While it may at first seem odd that only 82 per cent of the total sales of the surveyed agriculture and related service businesses are agriculture-related, this can be explained through a closer analysis of the businesses involved. This sector includes farms, as well as businesses that provide services to farmers. The primary activities of these businesses are agriculture-related, and they are categorized accordingly, but part of their sales may also be attributed to other sectors of the economy. An example is a veterinary clinic, which, while it may specialize in large animals, may also offer services to urban pet owners. Information was collected from 21 businesses categorized as agriculture or related industries that provided financial data.

Half of all sales for businesses surveyed in the construction industry are related to agriculture. Average sales are $1 million for the businesses surveyed in 1996. Agriculture-related sales reach $460,000 per year. Plumbing, heating and electrical businesses in the survey were particularly linked to agriculture. This is based on information provided by the 25 construction companies that provided financial data in the study.

The average sales for businesses surveyed in the mining industry is $600,000 per year. Thirty percent of this amount can be attributed to the agriculture industry. It must be noted that only four businesses were surveyed in this industry, and these concentrated only in the salt mining and sand and gravel pit industries.

Average sales for surveyed real estate and insurance businesses involved with the agriculture industry in Huron County are $3.8 million per year, with 47 per cent of these sales related to agriculture. Agencies with both high agriculture-related sales and very little agriculture-related sales were included in the study. Eight real estate and insurance companies provided financial data for the survey.

The business service industry includes legal and accounting agencies. There was an average of $98,000 in sales for businesses surveyed in this sector, with approximately 48 per cent related to agriculture. Four businesses were surveyed in this category.

x) Agriculture-Related Business in "Other Service Industries"

The category referred to as "Other Service Industries" include 4 surveyed businesses offering machinery and equipment leasing, welding and auctioning services. Average gross sales for this industry are $270,000. Forty-four percent of these sales are related to agriculture.

The number of full-time employees in a business is an indicator of the importance of that business in the economy. According to Statistics Canada, a small business employs one to fifty people; a medium business employs 51 to 250 people and a large business employs over 250 people.

By this standard, 97 per cent of the agriculture-related businesses in the study are small. The average number of employees for the businesses surveyed is ten. (This does not include employees in outlets.) While this average is meaningful, it should be noted that half of the businesses surveyed have between one and four employees, and 75 per cent of the businesses have less than nine employees. The range of employees per business is from one to 305 people.

Chart 9 shows that high numbers of employees are concentrated in agriculture and related service industries, manufacturing and mining for the businesses surveyed. Specifically, the average number of employees for the twenty-seven manufacturing businesses surveyed is nineteen. The average number of employees in the agriculture and related services industry is 16 people per business (based on 33 surveys). The average number of employees for the seven mining industries in the study is fourteen.

Source: Agriculture-related business survey.

All of the businesses in the study exchange goods and services with the agriculture sector. It is assumed that each of these businesses have employees working either full time or part time on activities to serve the agricultural sector. More than half of the businesses surveyed had at least two employees working on agriculture-related activities.

5.2.2.4 Exports of Agriculture-Related Businesses Surveyed

According to the 220 businesses surveyed in the study, 35 per cent of their sales are exported outside Huron County. In total, 65 per cent of the sales are retained inside the county, 29 per cent of the sales are exported to locations in Ontario (except Huron County), and 6 per cent are exported outside Ontario. These sales include sales related to and unrelated to agriculture, but are the total sales for all agriculture-related businesses surveyed.

Source: Agriculture-related business survey.

As can be seen in Chart 10, agriculture and related service businesses export 35 per cent of their goods and services to locations outside Huron County, but inside Ontario. Ten percent are exported to locations outside Ontario. The businesses surveyed in the mining industry export 11 per cent of their products and services to locations outside Huron County. Manufacturing businesses in the survey export half of their sales to locations outside Huron County, with 13 per cent going to locations outside Ontario. Surveyed construction businesses located in Huron County generate 19 per cent of their sales outside the borders of Huron. Transportation businesses in the survey have export sales of 50 per cent. Wholesale businesses in the survey export 40 per cent of their sales outside Huron. Retail businesses surveyed export 26 per cent of their sales outside Huron, but mostly inside Ontario. Seventy percent of the sales for the real estate and insurance businesses in the survey are generated inside Huron County. Business service industries in the survey such as accounting and law firms working in agriculture export only 10 per cent of their sales outside Huron. Other service industries, such as welding companies and auctioneers, have 32 per cent of their sales exported.

5.2.2.5 Summary: Agriculture-Related Businesses in Huron County

The analysis shows that businesses that buy from or sell to agriculture in Huron County generate a sizable amount of money and jobs inside Huron County. Furthermore, for both employment and income, Huron County companies generate flows of income and expenditure outside the county. It is estimated that $1.5 billion in agriculture-related sales generated in Huron County by agriculture-related businesses. These businesses generated $1.2 billion in agriculture-related sales in other parts of Ontario and a further $785 million outside Ontario. This income is exchanged among the three regions (inside Huron County, outside Huron County but inside Ontario, and outside Ontario), which benefits local businesses. The total amount of agriculture-related sales for all three regions is $3.5 billion

Businesses supported by agriculture generate additional sales in other sectors of the economy. Total sales of agriculture-related businesses in Huron County reach $3.7 billion, including sales related and unrelated to agriculture. This is shown in Table 8.

Source: Agriculture-related business survey.

Indirect employment is a further impact of the agriculture sector. There are approximately 12,000 indirect agriculture jobs created in Huron County by agriculture-related businesses. In addition, there are jobs supported outside Huron County by both Huron County residents purchasing from outside the county and by jobs in subsidiary locations of county businesses. This is seen in Table 9 which shows 2,058 jobs maintained by Huron County agriculture-related businesses located outside Huron County. These jobs are supported through sales inside and outside of the county and are important linkages for the Huron County economy. These businesses support an additional 4,873 jobs unrelated to agriculture. Total full time equivalent jobs created by agriculture-related businesses are approximately 19,000, including jobs related and unrelated to agriculture.

Source: Agriculture-related business survey.

Induced jobs in Huron County refer to service sector jobs that are supported by services purchased by agriculture employees. To make the estimates of induced jobs, two primary agricultural townships were selected (Morris, McKillop). In Morris, agriculture is the largest sector with 315 jobs, while construction industries with 70 jobs in the second largest sector. In McKillop, there were 390 jobs in agriculture and 75 in manufacturing, the next largest sector. All basic sector or export oriented jobs were compared to all non-basic or service industry jobs using the 18 industrial sectors in the 1991 census. The following results were obtained. In McKillop, 83 per cent of basic jobs were in agriculture. The non-basic sector in McKillop included 434 jobs while agriculture could be said to support 360 jobs. This suggests that for each one hundred jobs in agriculture, 82 jobs in the induced sectors will be produced. For Morris Township, the relationship suggests that 72 induced jobs per 100 basic jobs in agriculture. From these figures, there are an estimated 3,528 induced jobs in Huron County created by direct agriculture employment.

There are 4,428 direct, 12,128 indirect and 3,528 induced jobs created as a result of the agriculture sector in Huron County (direct figure is an estimate for 1996). Thus, farm operations, businesses they buy from and sell to, and services that support farmers and farm businesses are estimated to support approximately 20,000 jobs. In addition, there are $512 million in direct and $1.5 billion in indirect sales associated with agriculture in Huron County. Therefore, approximately $2 billion in agriculture-related sales are generated in the economy.

The economic base analysis of the eighteen employment sectors in the 1991 Population Census of Canada data for Huron County identified the base multiplier and the base ratio for Huron County. This analysis used the location quotient as well as assumptions about local industry to determine the basic and non-basic components. Thus, the location quotient is discussed before the economic base analysis.

Recall that a location quotient (LQ) value greater than one indicates a greater level of specialization in the region than the reference region in the sector, and a LQ less than one indicates a lower rate of employment in the study region compared to the reference region in the study sector. In this analysis, the reference region was the province of Ontario and the study region was Huron County.

The sectors where the LQ indicated a greater ratio of employment over the province of Ontario (LQ>1) were agriculture (6.42), fishing and trapping (2.3), mining (2.23), construction (1.16), health and social services (1.14), and wholesale trade (1.03). The other sectors have LQ’s under one with employment below the provincial average. These sectors include accommodation (0.98), logging and forestry (0.97), manufacturing (0.91), retail trade (0.90), transportation (0.87), other services (0.77), education ( 0.73), government (0.71), communication (0.68), real estate (0.56), finance (0.50), and business services (0.38). In analyzing the LQ, it is important to compare the magnitude of the number relative to one.

Huron County is one of the better agriculture producing counties in the province (Huron County, 1991, p.7). Therefore, it is no surprise that the LQ was greater than one. The fishing and trapping industry also had a LQ greater than one. This industry is also mainly for export, as is the mining industry which exports both salt and aggregates out of the county. The construction sector is on the rise in the county with the increase of tourism-related construction such as cottages along the lake (Dahms, 1982, p.22). The health and social service sector also had an LQ greater that one, indicating a higher degree of employment in that sector for Huron County than in the province of Ontario. The wholesale sector was the final sector with a higher employment rate than the wholesale sector in the province as a whole. This is most likely accounted for by the agri-related industry. This can be seen in Tables 10 through 13.

The economic base calculations were predicted on a combination of the L and assumptions made from local knowledge of the economy. In this method, the sectors of agriculture, fishing and trapping logging and forestry, mining and manufacturing were classified as basic. This assumption has been made based on the exporting nature of the sectors as a whole. Local knowledge indicates that manufacturing, mining and agriculture all export their products outside the county. The products of forestry and fishing are also exported from Huron County.

The results of the LQ on the eighteen sectors demonstrated that twelve of the eighteen sectors had a LQ of less than one. However, there are certain points that indicated to the researcher that not all of these sectors should fall in the non-basic component of the economy. For instance, the manufacturing industry (LQ=0.91) in Huron County produces road graders and salt for export. The logging and forestry (LQ=0.97) is also a net exporter. As well, it is unrealistic to assume that the 59,065 people in Huron County could consume all the manufactured production from the county. For this reason, the manufacturing and forestry sector were included in the basic component.

The LQ was used to determine the remaining components of the basic sector. This was found by calculating the LQ for the remaining sectors of the economy and using the basic calculations for each sector with an LQ greater than one. This yielded three additional sectors where part of the employment is to be included in the basic component. Only the basic employment for these sectors was used to provide the overall basic component for Huron County. In Huron County, only three sectors had LQ’s greater than one, indicating they were more specialized than the province in the sector and potential exporters were assumed to produce solely for local consumption because they had LQ’s less than one.

The economic base analysis that provided estimates of employment for the eighteen sector 1991 census employment data have been classified into basic and non-basic employment. Basic sector employment includes the entire sectors of agriculture and related sectors (4,845), fishing and trapping (25), logging and forestry (75), mining (425), manufacturing (790). As well, parts of construction (318), wholesale trade (39), and health and social services (356) sectors have been included because their LQ were greater than one. Only the portion of the employment calculated as basic has been included in the basic component. The non-basic sectors are transportation and storage (905), communication and utilities (710), retail trade (3,505), finance and insurance (705), government (1,620), real estate and insurance (310), business services (765), educational service (1,475), accommodation, food and beverage (1,750), and other services (1,515). Non-basic employment was in retail (3,115), health (2,359), and accommodation (1,714). The highest basic employment was in business services (765), education (546), and other services (453). These data can be seen in Tables 10 through 13.

Table 10: Economic Base Analysis Results: Calculated for Sectors with Location Quotients >1

Table 11: Economic Base Analysis Results: Sectors Assumed as Basic

Table 12: Economic Base Analysis Results: Non-basic Calculated for Sectors with Location Quotient<1

Table 13: Total Basic and Non-basic Employment

The calculations for the base ratio and the base multiplier require the determination of the basic and non-basic components. The economic base multiplier (EBM) is calculated by simply dividing the total employment by the basic employment. The formula is shown in equation 1. The economic base ratio (EBR) is calculated by dividing the basic by the non-basic. These two calculations were made using the basic value of 10,873 and the non-basic value of 19,222. Thus, the economic base multiplier is 2.77 (30,095/10,873) while the economic base ratio is 1.76 (19,222/10,873).

Equation 1: Formulas for the Economic Base Ratio and the Economic Base Multiplier

Source: Bendavid-Val, 1991,p.78.

The economic base analysis demonstrated the overall impact of the combined exporting industries on the county. Combined, industries in agriculture, fishing and trapping, forestry, mining, manufacturing as well as construction, wholesale trade, and health and social services, support 19,222 jobs in the non-basic sector. Overall then, the base multiplier is 2.77 and the base ratio is 1.76. This means that for every one job in the basic sector, 1.76 jobs are generated in the non-basic sector.

Twelve agriculture-related businesses were randomly selected from the total number of businesses that responded to the survey in 1996. An in-depth case study of these businesses was completed. This analysis focused on the backward and forward linkages of agriculture-related businesses in Huron County. These linkages refer to the products and services sold by the business (forward linkages) and the products and services purchased for the operation of the business (backward linkages). The linkages and interactions with the agriculture sector were highlighted. The in-depth analysis also involved collecting information on the value of sales and the number and type of employees. The analysis also attempted to identify the changing nature of the agriculture sector and the impact of this change on agriculture-related businesses. Discussed below are a number of similarities and recurring issues between these businesses.

The primary result of this analysis was to emphasize the wide range of activities linked to agriculture. For example, the random sample of twelve agriculture-related businesses included typical agriculture-related activities such as feed and supply stores and veterinary clinics, but also included; a real estate agency; a plumbing and heating business; a water drilling company; a vehicle dealership; a communications cooperative; a transportation company and an air compression service operation.

Most of the agriculture-related businesses interviewed sell products and services to both the agriculture sector and other sectors in the economy. The owner of a plumbing and heating company indicated that approximately 10 per cent of his total gross sales could be attributed to agriculture. The products and services provided by the business include the sale, installation and repair of plumbing fixtures to both residential and commercial businesses. This includes pumps and waterlines for barn water systems. The business also sells and installs heating systems, including natural gas and oil boilers, and hydraulic systems. The business also provides other services and products not typically utilized by farmers. These include the sale, installation and repair of air conditioning systems, air changing systems, central vacuum systems, water conditioning systems, pumps (for sewage and wells), and fireplaces.

Many of the agriculture-related businesses surveyed are operated out of the home, such as a real estate agent. Another business owner, an air compressor specialist, works from the garage of his home located in an urban locale. He installs and repairs air compressor and high-pressure washers used in agriculture production. Other businesses interviewed operate in separate buildings, but on the same property as the residence. These include a plumbing and heating business and a water drilling operation. One owner noted that this saves on the costs of operating a business location, but some problems were noted. Often the house is used as office space, and the division between personal and business can become blurred. One of the businesses interviewed was a livestock transportation business operated by a husband and wife team. The business has been in the family for approximately 50 years and is located on the property on which the family lives. During the interview, which was conducted at the kitchen table, the interviewers noted the all-consuming nature of the business. Within the space of only a half an hour, an owner prepared a meal and answered five business calls, three employees came into the kitchen to ask the second owner a variety of questions, one employee worked on a computer in a small office which doubled as a laundry room and, finally, the house pets were fed. This hectic pace and melding of the personal and business aspects of their lives was discussed and the owners agreed that the business had "taken over their lives" to some extent.

A number of the business owners interviewed had another source of income other than the agriculture-related business. A number owned and operated farms. Many were also involved in community activities, such as local politics and agricultural and other lobby groups. Taken as a whole, those interviewed were extremely busy people both in their various businesses and in the community.

A husband and wife team operates more than half of the businesses interviewed. For example, the wife of the air compression specialist mentioned above does all of the bookwork for the business. A husband and wife team also jointly operates the livestock transportation company. A number of the businesses had other family members working for the company. In one case, a father owns a farm equipment and service operation and each of his two sons operates two separate parts of the business, (which are in fact two separate businesses). One of the sons works exclusively with the used parts service, while the other takes care of the new machinery being sold by the business.

Furthermore, almost a quarter of the businesses are family operations passed down over generations. For example, a real estate agent owns the same business his father owned since the late 1960s. The son took over the business in the late 1980s.

More than half of the business reported increased sales in 1996 over 1995. There is apparently a trend of growth of the businesses interviewed. Consequently, some of those interviewed are investing heavily in expansion. A feed and supply company, for example, recently added another building to the operation, one of three in the last decade. The owner stated that the growth is due to increased demand created by larger farm operations. As described above, there is a trend in Huron County, and beyond, toward a decrease in the number of farms and an increase in their size. The owner of the feed and supply company also reported that his operation is expanding geographically as well and an additional sales person has recently been hired to handle the new accounts.

Some of the agriculture-related businesses interviewed also reported an expansion in the type of business activities undertaken. This expansion is meant to meet the changing needs of agriculture. For example, a livestock transportation operation, established over 50 years ago, began as a local trucking business. Then, in the early 1990s, it became an international livestock trucking company. The owner stated during the interview that this expansion was an excellent decision as the success of the business has grown exponentially. He went further to state that "the choice is to grow or die in this day and age."

Another business expanding the number and types of services to support the agriculture sector is a water drilling company. The business offers services such as water well drilling and other types of drilling, installation of water lines and water systems, and water conditioning. Traditionally, drilling and water systems were services associated with agriculture, while the later product was purchased by residential and business locations. Over the last several years, however, the owner has had a number of contracts to install water conditioning systems in barns (i.e. swine) and stated that he believes this demand from the agricultural sector will grow. The owner also told the interviewer about the recent installation of a hydroponics system to heat the building of a large chicken operation. He is hopeful that there will be an increased demand in such systems since larger farm operations have the capital and need for such expensive and complex systems.

As suggested, these are sophisticated systems, and they illustrate the changing nature of the agriculture sector. As the owner suggests, "the farmer is specializing, and so must we." The specialization and expansion of farm operations, the amount of capital available to the agribusiness industry and large farm operators, and the growing sophistication of the farmer are combining to change the nature of agriculture and, at the same time, the nature of agriculture-related businesses.

One of the veterinarians interviewed, who has been in the business for several decades, noted this specialization of agriculture. He suggested that "twenty-five years ago, a typical farmer operated a diversified farm; ... he may have been growing some crops, and keeping cattle and pigs. That’s just not typical today." What is typical is a large operator dealing in one product (i.e. swine). This veterinarian noted that, consequently, most large animal veterinarians in Huron County are experts in a certain farm animal and only work within their own specialty.

This veterinarian also suggested that, as farmers specialized in certain areas, they are becoming more skilled in these areas. The farmers themselves are becoming experts. For example, a large swine operator will have a large amount of knowledge and experience in the management of swine, and is less likely to call a vet when an animal is sick since he/she will know how to handle the situation. Thus, the role of the veterinarian has changed accordingly. The vet interviewed stated that he goes on fewer farm visits today than in the past (since the 1970’s). Twenty years ago he may have visited fifteen or more farms a day. Currently, he visits approximately four to five farms per day. The veterinarian adapts to the change by offering new services in demand, such as nutrient advice and formulation work. While on a regular health visit, this veterinarian will give animal nutrition advice and rations. He purchases these products wholesale and receives a commission from the company for each sale. He reported that this is a growing part of his business.

As can be seen in this example, a marked change in the agriculture business creates an equivalent change in the agriculture-related businesses associated with that business. Many of the interviewees noted an increased demand by the agriculture sector for personalized service. An example is an abattoir and meat market where the main activity is custom killing, which makes up 60 per cent of the total business sales. Farmers intending to resell their meat make up 50 per cent of this business. The owner estimated that 40 per cent of his total gross sales are agriculture-related as farmers are adding value to their livestock for non-personal use.

Increased demand for more complex and sophisticated products and services has entailed a more skilled and diverse labour force for the agriculture-related businesses interviewed. For example, the air compression specialist mentioned above has practiced his craft for more than 35 years. He installs and repairs air compressors and high-pressure washers. He has noticed an increase in the demand for his specialization in the last decade. He is over 70 years old and would like to retire, but the current demand for his expertise is significant. He continues to work at least one day a week.

Another interviewee noted that experienced employees are becoming more difficult to find. This interviewee has an international livestock trucking company. Business activities involves the transport of livestock such as bulls, cows, steers, sows, boars, fat hogs, wiener pigs, horses and liquid ammonia nitrate. There are a total of seventeen livestock tractor-trailers (i.e. fourteen 50 feet long and three 53 feet long). There are four liquid tanks for the fertilizer transport. Along with the two owners, there are from twenty to twenty-five employees at any given time. There are mechanics, secretaries, trailer washers, pig sorters and drivers. There are also a number of brokers working for the business.

All of the employees at this business were hired within Huron County, although the owner expressed concern that this is becoming more and more difficult. He complained that there is a shortage of trained drivers who know how to deal with livestock. He suggests this be due to the fact that "the farming industry is changing so much, and all the young guys on the farm are leaving for city jobs."

The result of the interviews was to highlight certain trends in agriculture-related businesses sector in Huron County. The most significant finding was the linkages created by agriculture through agriculture-related businesses. These linkages illustrate the interconnectedness of agriculture with the rest of the Huron County economy.