By Sarah Pittman
Published in the Hill Times
November 5, 2018
Canadian farmers are facing serious problems—like extraordinary debt loads, mental health woes and unusually bad harvests in the Prairies—that are encroaching on the sector as a whole. While some of these problems are as old as the industry itself, there are recent shifts that may have far-reaching implications. These issues are bearing down just as the country is looking to the agricultural sector to seize broader opportunities in new trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnerships (CPTPP), which opens crucial new Asia-Pacific markets.
A clear example of the shifting problems facing agriculture is debt. Debt has always had a place in farming; in fact, a growth in debt can be an optimistic sign. When farmers are feeling confident about the industry, they may choose to expand their operations, which almost inevitably requires the farmer to dip into the red.
But things have started to change. Agriculture debt is at record highs for farmers across the country. In 2000, total farm debt in Canada was $38.8-billion. In 2017, it was $102-billion, an increase of 164 per cent. Today, there are less farmers and bigger farms, meaning a bigger debt load per farmer. In 2000, average farm debt was $157,000 per farm. In 2017: more than half a million dollars.
The prime interest rate is also an important factor. It has been remarkably low for several years, but this year (while still low) it has increased four times, and is now 3.70 per cent, higher than it has been in a decade. While 3.70 per cent may not sound like a lot, anyone with a variable-rate mortgage knows the pain of an interest rate bump.
The other variable change this year, for Prairie farmers especially, is harvest. Cold, wet weather has lingered over much of the Prairies through September and October. Crops can’t be stored when they are wet, and their quality—and price—drop drastically when left in the field wet. By mid-October, a little more than half of harvest was done in Alberta—usually 90 per cent is done by this time. That’s an estimated $3-billion worth of crops laying in fields, rotting, in Alberta alone. Bad harvests are nothing new; but this harvest is particularly bad.
These factors on their own are bad enough. But taken together, things start to look ominous.
There are financial stopgaps in place for agriculture, but—with this convergence of factors—it is worth questioning whether they are enough. There are two pieces of relevant federal legislation. The first is the Farm Debt Mediation Act of 1997, which is designed to provide mediation between insolvent farmers and their creditors. While mediation in these cases is certainly useful, this type of legislation is not designed to make the industry resilient, but to provide an independent party to negotiate debt payment when the farmer is bankrupt. The other piece, the Farm Income Protection Act of 1991, is the one that, in conjunction with the provinces, helps pay crop insurance or disaster payments (in the event of a natural disaster). Crop insurance is used when a farmer has an unusually poor harvest, to help the farmer scrape through to the next year. “Scraping through” is never easy—and is harder still with a pile of debt and an increased prime interest rate.
The challenges with debt in agriculture are tied to other factors, including mental health. These challenges are more common for farmers than the rest of the population (or for other farmers around the world, for that matter), with a recent study showing that 45 per cent of farmers report high stress, and 58 per cent anxiety (the House Standing Committee on Agriculture has begun studying the issue, following work done by The Do More Agriculture Foundation).
While some of the challenges that farmers are facing are being addressed, it is important to realize that the problems are not isolated and that future agriculture policy treat these problems as part of the bigger challenge of modern farming.
When it comes agriculture, there’s much to celebrate these days in new trade agreements. But there are also hard questions about the future of the sector Canada is counting upon to be a champion in growing trade.
Sarah Pittman is a policy analyst at the Canada West Foundation.