Canadian farmers had a rough time of it last year. They’re likely to have it rough again this year. And unless export disputes are settled, 2020 will be rough too.
So it is prudent that farmers consider — or in many cases reconsider — registration in government-run business risk management programs.
AgriStability and AgriInvest, in particular, offer some protection from market forces.
And pending changes to the under-used cash advance program should also help.
Statistics Canada reported an alarming 45 percent decline in realized net farm income for farmers last year, following a 2.8 percent drop in 2017.
Rising costs were the biggest culprit. Interest rates, which have increased five times since 2017, are the highest in a decade. Feed costs increased by 9.6 percent, cash wages increased by eight percent and expenditures on fuel shot up 18.1 percent.
It’s no wonder farmers are angry about the carbon tax. While it’s supposed to be revenue neutral, the inevitable increase in costs is worrisome.
Meanwhile last year, receipts barely nudged upward with wheat showing good strength, but receipts from lentils fell 35 percent and field peas dropped by almost 20 percent. Receipts from canola fell 6.5 percent. Given that canola brings in one-quarter of all cash receipts and is grown by more than 40,000 farmers, that drop is far-reaching.
Livestock revenue also dropped last year, albeit by just 0.2 percent.
On top of all this, total farm debt is now more than $102, billion, double what it was in 2000. Many have borrowed to invest in land, which has tripled in value since 2009. That gives farmers more assets to borrow against.
Last year, Farm Credit Canada pointed out that farmers’ debt-to-equity ratio remains strong, leaving room to borrow.
However, that was assuming strong demand for Canada’s crops. Trade disputes have hurt. India’s import duties have hammered Canadian pulses. China’s intractable position on refusing to import Canada’s canola is a serious blow to farmers’ most profitable and reliable crop. Durum exports to Italy have dropped significantly due to market protectionist forces, and Saudi Arabia stopped importing Canadian wheat after a political spat.
If any other industry saw net revenues drop 45 percent in one year they would close some operations and lay off employees.
However, producers must dip into their equity and borrow against their assets.
A review of business risk programs — which are typically split between the federal government (60 percent) and the provincial governments (40 percent) — is underway.
AgriStability is aimed at helping farmers deal with margin declines after production losses, increased costs, or depressed market conditions. Registration in AgriStability has been dropping in recent years because many farmers don’t see payouts and the program is seen as difficult to navigate.
In Saskatchewan, for instance, about 52 percent of eligible farm cash receipts were covered by the program, which means almost half of the province’s farmers aren’t signing up.
Still, AgriStability has paid out more than $200 million over the past three years. Now, with farmers facing increasing costs and uncertainty over some exports, it makes sense for those not using the program to take another look.
Registration has been extended to July 2. For some farmers, this may be a lifeline.
The review of business risk management programs may be a chicken and egg scenario. If farmers don’t use them, governments might not think they’re needed, but if they’re not very useful, farmers won’t participate.
Producers should consider using all the programs at their disposal. If they don’t, there is no way for governments to evaluate whether they’re actually in trouble.
Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.