Margin erosion leads to risk for all Canadians

This season might turn out to be one of the best for grain farmers since 2014 — provided the weather holds and prices remain steady or improve.

Currently, most clouds on the horizon seem to contain thunder showers, yet producers appear edgy about extra costs, amounting to a dollar here or there per acre. Why is that?

Government officials and urban Canadians who mistakenly think they don’t have skin in the farming game are quick to point out the averages.

The average farmer’s rainy-day AgriInvest account has $28,000 in it. “So, things on the farm must be OK or all $2.3 billion would be drained out. Don’t come looking for more supper until you finish what is on your plate, buster,” they seem to think.

They are quick to suggest other things that are more apparent than real, especially when they feel it isn’t their money they are talking about.

Carbon tax on grain drying might be roughly estimated at $96 million for last season’s crop in Canada, based on government estimates of 0.3 percent of operations.

“Why, that’s only $200 to $800 per farm. Why can’t farmers help out with our national plan to reduce greenhouse gas emissions? Likely climate-change deniers too,” they appear to think. In this case the “they” might be some folks sitting around the federal cabinet table.

Canada also needs to sort out this China trade issue. Many people believe Meng Wanzhou from Huawei should be held until the Americans come for her. Others believe Canada should set Meng free in exchange for Canadians Michael Spavor and Michael Kovrig, who are being held in China and are expected to soon be subjected to trial.

The non-farming public might think: “Farmers should be more supportive of our international agendas. Why don’t farmers understand how important the international rule of law is or why we can’t fight this global bully? Farmers should do their part to pay for this.”

The problem with taking an overly broad view of these issues is that the cost they add to farming operations isn’t evenly spread. They paint a distorted picture of reality. Cost and risk increases are cumulative and averages do not represent the true picture.

New farming costs and market disruptions are extracted from the funds farmers have to live on — the margin. That difference between what farmers are paid and what they paid to produce their goods gets smaller all the time.

Fuel prices mostly go up. Labour costs always go up. Transportation up. Equipment prices up. Seed prices always go up. Fertilizer moves up and down, but, over time, up. Land prices nearly always go up. Governments have been shifting business costs to business through user fees for some time and farms are no exception.

Eliminating provincial extension agrology has pushed farmers to seek private, paid consultants for applied science and farm operations advice or caused them to give suppliers a bigger cut from their grain cheques for providing those services.

But grain and oilseed prices remain flat, or in some cases appear to be dropping.

This endless margin erosion has led producers to expand operations and, in many cases, eroded operational diversity, adaptability and financial resiliency in the sector, making farmers more financially vulnerable, increasing the risk that public accounts will be needed to bail producers out when, inevitably, markets and weather go wrong.

All Canadians have skin in the farming game — it’s just that some of us have more than others.

Karen Briere, Bruce Dyck, Barb Glen and Mike Raine collaborate in the writing of Western Producer editorials.

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