One thin dime for farm profit margins – WP editorial

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Published: May 23, 2002

AS VARIOUS governments or their agencies eliminate or charge more for

services, the Statistics Canada census of agriculture serves as a

warning signal: farmers have reached the limit on expenses.

The census shows that in the past five years, western Canadian farmers’

profit margins have been squeezed unmercifully. Commodity prices

dropped, expenses rose and the ratio of operating expenses to gross

farm receipts grows more uncomfortable.

This has influenced the most dramatic decrease in farmer numbers in any

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five-year period since 1966-71.

In 2000, on average, “farmers spent 87 cents on operating expenses (not

counting depreciation) for every dollar received in gross farm

receipts,” reported Statistics Canada. That was up from 83 cents in

1995.

A breakdown by province is more revealing. Manitoba followed the

national average, rising to 87 cents from 83 cents. Alberta rose to 90

cents from 84 cents and British Columbia climbed to 91 cents from 90

cents. The biggest change was in Saskatchewan, where it rose to 85

cents from 77 cents.

Why such a squeeze?

In the last five years, Saskatchewan farmers have experienced a

whopping 27.2 percent drop in prices for their products, but the price

for inputs such as fertilizer and chemicals rose 8.5 percent.

Manitoba’s commodity prices dropped 11.9 percent and expenses rose nine

percent. Alberta’s prices fell seven percent and expenses rose 11.9

percent, while B.C. prices rose 7.8 percent but were offset by a 9.8

percent increase in expenses.

The Prime Minister’s Caucus Task Force on Future Opportunities in

Farming got this message several weeks ago. Its interim report said

“one of the biggest complaints we heard from farmers was the fact that

their costs have increased more quickly than have their profits. The

biggest concern in this area was the increased cost recovery fees

charged by government.”

The task force recommended that the government examine the implications

of cost-sharing services under the Pest Management Regulatory Agency

and the Canadian Food Inspection Agency. It suggested freezing or

reducing fees if they are higher than what farmers pay in other

countries or sectors of the economy.

Yet provincial and federal governments appear set to implement even

greater cost recovery policies. In their drive to encourage value-added

initiatives, governments are removing primary services to agriculture.

With margins so tight, farmers need the best advice possible on

disease, pests, weather and production. If they must pay more for

public services or seek information from private sources, that dime or

two of profit from every dollar may shrink into nickel territory.

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