ST. PAUL, Alta. – Nineteen years after starting to build his cow-calf operation, Jack Tymofichuk sat in the cab of his truck surrounded by some of his 80 cows and conceded the impossibility of a dream.
It was late March, he had spring bills to pay and undervalued calves and cull cows to sell.
“I always thought I’d like to buy and own one new tractor in my life,” he said. “I guess that’s never going to happen. I’m losing too much equity.”
He figures income from animal sales will be down more than $20,000 this season with losses mounting.
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While these loss numbers are small compared to the millions lost by larger operators in the south, it is a sharp setback in his operation. It means he will not be seeding as much land to oats and wheat, with the prices of fuel and fertilizer higher.
For financial and health reasons, a shrinkage in the herd also is likely.
“Things are tighter than they’ve ever been,” he said. If not for winning a local contest last autumn that allowed him to pay off his land 10 years ahead of time, it would be worse.
“If I had land costs, if it hadn’t been for my luck last fall, I’d be in a much deeper hole,” said the 44 year old.
“But this really isn’t sustainable. I can’t see it working.”
Thousands of kilometres east on Prince Edward Island, Jim and Jennifer Doyle say the hole they are in is just getting deeper.
They operate a feedlot, own part of a hog operation and plant 1,300 acres in feed and commercial crops on their farm outside Charlottetown. Almost every part of their operation has been losing money.
At her kitchen table one March morning, Jennifer was doing some quick calculations.
“Every day when we get up, we’re going to lose $1,000,” she said. “It’s depressing.”
Jim struggled to fill in the blanks.
“The cattle is bad but we could survive the kicking we’re getting there but we’re losing $20-$50 a pig,” he said. “That’s a chunk of change.”
He is part of a committee that is asking for provincial support. In cash-strapped P.E.I., more government money is unlikely.
Across the strait in the normally prosperous farm belt around Sussex, N.B., dairy producer Reg Perry marvels that even his normally stable sector has been hit.
He milks 60 cows and like dairy producers across the country, the value of his cull cows dropped dramatically. As importantly for his operation, the Havelot, N.B., producer counted on sale of bred heifers into the American market to add to the bottom line.
“I just finished my income tax and in 2003, my revenues were down close to $21,000 on a gross of $300,000,” said the 49-year-old industry veteran. “I know we have stable income through milk sales so we’re better off than most sectors but that is a hit on my farm operation for sure. Even in dairy, things will be tighter and that affects what we can buy and the impact spreads out to the suppliers and the small towns that we help keep going.”
These are some of the human faces behind what statisticians have determined is the worst recorded farm income disaster in Canadian history. In 2003, for the first time ever, national realized net farm income was a negative, at -$13.4 million.
Four provinces had negative incomes – Saskatchewan -$465 million, Alberta -$229 million, Ontario -$44 million and New Brunswick -$1.1 million – and except for Quebec, all the rest recorded sharp declines.
What distinguishes this income meltdown from previous farm crises is its breadth and depth. It is difficult to find a sector that is not under siege.
“I’m not sure that anyone from outside agriculture or who isn’t close to it really can appreciate how wide and deep and devastating this is,” said Saskatchewan agriculture minister Mark Wartman, who inherited the portfolio this year just as Saskatchewan recorded a farm income year worse than even the bleak years of the Great Depression.
Across the country, no region was spared.
The beef industry continues to suffer the after-effects of BSE, grain and oilseed prices are low compared to costs, hog income has been down, dairy has had a multimillion dollar hit from BSE, the poultry industry is reeling from avian influenza and the potato industry is experiencing deep losses.
“I’ve been associated with farming and farm politics all my life and I’ve never seen the situation so bad, the hurt so universal,” said Prince Edward Island Liberal MP Wayne Easter.
Examples abound.
On April 1, Winkler, Man., bean producer Jack Froese appeared before the Senate agriculture committee to promote the pulse industry. Several senators enthused that at last, someone was presenting an agricultural “good news story.”
But behind the facade of good news was the familiar story. Froese said he was selling beans for 20-22 cents per pound. Later, he said in an interview he would have to sell at 24-25 cents per pound to cover costs.
“I’m actually losing money right now,” he said.
So much for the goods news story.
“This really is unprecedented,” said Larry Martin of the Guelph, Ont., agricultural think-tank George Morris Centre. “A series of problems have come together at one time to create a disaster.”
In Saskatoon, National Farmers Union research director Darrin Qualman said it is leading to a “hollowing out of a place like Saskatchewan where food production is so important.”
Explanations for the disaster vary, depending on the analyst and their perch.
BSE and closed borders have been an obvious hit. Economists say the losses since May 20, 2003, are $3 billion or more and governments have spent or promised more than $1.5 billion in aid or market investment.
Low commodity prices have become a chronic problem, driven in part by the impact of production-enhancing subsidies in the United States and Europe.
The hog cycle has shortened and its downturns more severe as increased production swamps the effective market.
The popular low-carbohydrate Atkins diet is blamed for weak market demand for both potatoes and wheat.
The NFU argues that a key issue is weak farmer power and the ability of more powerful input suppliers and downstream processors and retailers to capture most of the value of food produced.
And during the past year, the value of the Canadian dollar has appreciated 20 percent against the U.S. dollar – the currency in which Canadian exports are priced.
Martin said the exchange rate and Bank of Canada failure to keep Canada’s currency value low has been one of the greatest avoidable reasons for the farm crash.
He has calculated that the currency increase reduced the market value of an 89 kilogram carcass-weight hog by $16.62.
“A well-performing 1,200-sow operation will sell approximately 21 market hogs per sow per year or 25,200 hogs,” he wrote in an analysis published in late 2003.
“If the operation is affected for six months by the exchange rate moving from 65 cents to 75 cents, this is a loss of $209,475. The same kind of scenario applies to grain producers.”
It is an income crash so widespread and profound that it has brought some unorthodox questions from farmers.
Is there a way to reduce Canada’s agricultural export dependency? Was building a large segment of the industry dependent on foreign market access a smart move?
Is the 2003-04 income crisis an exception or a severe glimpse of the future?
At the University of Saskatchewan, agricultural economist Murray Fulton displays charts that show the value of farm products declining steadily for more than a century with just occasional upward spikes when world conditions conspire to convince commodity buyers that there is danger of shortage.
As technology and efficiency increases combine with expanding food production in the developing world to signal surplus production (even though current world grain stocks are tight and hundreds of millions of people do not have enough food), economists argue that farmers should not expect a reversal in the low-price trend.
“Long term, these prices are falling,” Fulton said. “There is no indication, no reason to believe that these prices won’t keep falling.”
Is there any way to increase farmer market power? In Ontario, this question leads the Ontario Cattlemen’s Association to think the unthinkable in cattle circles – would a central desk selling system give farmers more clout with packers and other buyers?
Is this a temporary situation or evidence of a structural problem and if the latter, are government coffers and political will strong and deep enough to keep supporting farmers unable to make a living from the market?
At least in the short term, governments say they are able and willing to come to farmers’ aid. The 2003 income collapse produced a record response from government-supported programs, a promise of up to $5 billion over the next year or two to compensate for 2003 losses.
It even caught the prime minister’s attention as he travelled to southern Alberta in late March to announce a $1 billion farm support package.
Paul Martin said the crisis extended well beyond the beef industry and the effects of closed world markets to Canadian cattle.
“As well as the fallout from BSE, farmers across Canada are facing other significant challenges as well,” said Martin.
“Farmers on the Prairies are dealing with successive years of drought and grasshopper damage. Farmers in Eastern Canada also face daunting challenges. Last year, these and other challenges combined to push farm incomes across Canada to its lowest level in recorded history. These are hard times.”
They are hard times indeed as British Columbia poultry producers contemplate the slaughter of 19 million birds this spring to stop the avian flu from spreading, as potato farmers cope with give-away prices, as beef producers wonder how long borders will remain closed and what will happen when they open.
Behind those global questions are tens of thousands of farm stories that illustrate the scope and depth of the problem.
On their ranch near Mossbank in south-central Saskatchewan, Jonathon and Mona Kolish figure the worst is far from over.
“I really think 2004 will be worse,” Jonathon said in the kitchen of the operation that is based on 280 cows and backgrounders.
“This past year, farmers have been making do with money really that they earned for last year. And there has been some government help. But the effects of this is going to hit harder later and for years.”
He figures losses on calves and yearlings will strip tens of thousands of dollars from his revenue this year, even after government help. “That’s right out of my pocket, profit.”
Like beef producers across the country, Kolish wonders why the industry allowed itself to expand on the assumption of access to the American market, allowing much of the domestic packing industry to disappear.
“When does the madness end? We are dependent on a very protectionist country.”
In Ontario, cattle sector leader Ron Wooddisse has watched income collapse and equity erode and is predicting shrinkage in a provincial industry that involves more than 20,000 operations large and small.
“A large number of producers will exit the industry, whether from financial pressure or exhaustion.”
At his St. Paul, Alta., insurance office, Robert Logue has watched the impact of the poor farm economy on his business and those around him. He said local machinery dealers have seen business disappear and his insurance sales are down.
“This is the first time in 20 years in the insurance business where I’ve seen farmers not be able to afford the insurance,” he said. “It didn’t even happen during the drought years.”
Logue has a 65-head cow-calf operation on the side and is building an agri-tourism business.
The 52 year old had plans to double his herd, possibly to become a full-time producer with a tourism sideline.
“The plans to increase the herd definitely are on hold,” he said. “This is not a time to be investing in the industry until some of the uncertainty is gone. This past year really has taken the wind out of the industry and I think made a lot of people wary.”
For many, it also is not a time to think about retiring from the business, even if that has been the plan.
Hogue also is involved in estate and succession planning. He said that part of his business has ground to a halt.
“This has put a lot of succession planning on hold,” he said. “Parents are wondering if they really want to see their kids in the business. Kids probably are wondering if they want in. And if the plan was to sell it outside the family, values are down and in effect their retirement savings have been evaporating with their equity.”
In Regina, assistant deputy agriculture minister Hal Cushon used that argument to question widespread speculation that the income crash will force many farmers out of the business.
“In fact, exit from the industry usually increases when times are good, not when times are bad,” he said.
“That’s when assets are worth more, the retirement nest egg is healthier and there is enough optimism in the industry to attract new investors.”
On his P.E.I. potato farm, James Shaw is at the age when he should be considering how and when to pass on the farm. At 62, he has been on the farm for 38 years.
But the last decade, punctuated by trade disruptions and income crashes because of potato wart, PVYN virus and below-cost prices, has eroded his equity and his ability to walk away.
It also has convinced him the business that defined his life should not stay in the family, either with son Kevin or his grandchildren.
“I wouldn’t give my grandchildren one ounce of encouragement to consider this,” he said. As for Kevin, “I would be throwing him in with an anchor attached. I wouldn’t do that.”
