The Saskatchewan government should throw out the formula used to calculate rental rates on crown land used to grow grain, says the National Farmers Union.
The formula, which is based on the previous year’s grain prices, would have triggered an average 51 percent increase in rental rates in 1997.
The provincial government stepped in and limited the increase to 25 percent, but that’s still unacceptable, says the NFU, especially in light of rising costs of other inputs like fuel, fertilizer and machinery.
“We think it should be buffered to a greater extent,” said executive secretary Darrin Qualman. “We should look at no more than a 10 percent increase for this year.”
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The farmers union wants the province to devise a new formula which would prevent huge changes from one year to the next.
“Stability and predictability is valuable to farmers,” said Qualman.
The government could limit the annual change in rental rates to five or 10 percent, or base it on something like a five-year rolling average of grain prices, rather than the previous year.
Agriculture minister Eric Upshall said he has instructed officials to look at some different options for a formula that would not be so influenced by year-to-year swings in grain prices.
“I’m waiting for the department to bring forward some various recommendations,” he said.
But he also stood by the government’s decision to set the increase at 25 percent.
“We could have said zero change or 10 percent, but if we had done that and the grain price continued to climb and the lease is fixed on grain price, the big jump would have been next year,” he said. “We tried to hit the middle of the road so the increases would be consistent from year to year.”
He added the government has received complaints that the rates on public land are already too low and the government is unfairly subsidizing those farmers who have a crown land lease. There are 3,973 crown land leases, covering 794,357 acres.
Detailed calculations
The 1997 rental rates were determined by a formula based on grain markets in 1995-96, a year of extremely high prices.
Here’s how the formula works:
- Final prices from the previous crop year are calculated, less average handling and transportation charges.
- A basket of grains is used, weighted to 73 percent wheat, 17 percent barley and 10 percent either flax or canola, depending on the area.
- The average price is multiplied by crop insurance average yields, then weighted for each commodity, which produces the total estimated gross revenue for that land. That is reduced by half to reflect summerfallow.
- The province then charges from 19 to 24 percent of the estimated gross revenue as rent.
“The entire purpose of the formula is to approximate a crop share situation, by estimating the gross revenue from the land and then taking a percentage share of that revenue,” said Dick Leigh, manager of crown land accounting for the department of agriculture.
He said the calculation provides a number of benefits to the renter, such as the assumption of 50 percent summerfallow and the 73 percent weighting for wheat at the expense of higher priced oilseeds.
“Our formula really has a number of pretty good-sized breaks built into for the lease holder,” he said.
