Banks Credit and Interest

[farmers_son]

Check out Stats Can
Farm Debt Outstanding:

http://www.statcan.gc.ca/pub/21-014-x/21-014-x2008002-eng.pdf

Farm debt by source:

43% chartered banks
30% Government Organizations
17% Credit Unions
9% Private and supply companies

Total farm debt outstanding end of 2007 was $54 billion dollars. Which if I am correct is more money than the automakers owe.

I have not found numbers to itemize what portion of that $54 billion is fixed and what is floating but if we assume that the 30% owed to Government organizations is fixed and the other 70% is floating than even a modest change in the prime will have a huge effect on agriculture.

I checked the Bank of Canada http://www.bankofcanada.ca/en/rates/interest-look.html

In the last 10 year period:

Low bank rate was 2.24% August 2004
High bank rate as 6% December 2000
Average bank rate for the 10 year period was 3.84%

The Bank of Canada rate is presently 2.5%

It is reasonable to assume rates could increase to 6% again (and they could go much higher). A 3.5% increase in the cost of debt given a farm debt with floating interest of $37.8 billion would cost Canadian agriculture an additional $1.3 billion each year for interest alone assuming overall debt levels did not increase.

Put in perspective…realized net farm income was $1.2 billion in 2006. An increase in interest rates of 3.5% would pretty much wipe out most if not all realized net farm income.

In 2007 total Canada farm program payments amounted to $4.1 billion.

The Canadian automakers just got $4 billion.

GM worldwide automotive debt is $30 billion, their bonds have been downgraded to junk status.

I could not get numbers but if we assume Chrysler’s automotive debt to be less than $24 billion than the worlwide debt of these two car makers is roughly equivalent to debt burden being carried by Canada’s farm men and women.

Why isn’t there an equivalent concern over the farming sector?

[kato]

When the Liberals were in power they ignored us because we were not the ones who voted them into power, being mostly from the West and mostly voting Conservative.

Now that the Conservatives are in power, they ignore us because they are confident that whatever they do, we will vote Conservative.

The bottom line is that there are not enough people who vote who care about agriculture. Voters care if they lose jobs in the auto industry. Voters care if the local mall shuts down. Voters care if their pension funds lose value. Voters don't care if we are here or not, because they mistakenly think that they can always get food from somewhere else.

We are not on the radar. However, we need to be right up front and center, because the bottom line is that whatever else happens in someone's life, they still need to eat. If more consumers saw and appreciated just how important food security is to a country's well being and independence, they'd be backing us up.

People in this country have never been hungry, and if you've never been without something you really don't appreciate it. We need to be more proactive about getting that message out, and we'll keep on being ignored until we do.

[grassfarmer]

Excellent post Kato! I think you are bang on - now if we can only find a way to make farmers become proactive.

[perfecho]

I do agree with the premise, however I feel the consumer cares about where there food comes from, just don't resize what is happening. And that is where we, as farmers fall down.
The feds and province say X$'s are going into ag...we have leaders like fearless Ralph that, in his words" don't worry, we will take care of our farmers". It's their job to make it look like it is all "good down on the farm". The average consumer has no idea how much of a struggle it is....because we do little to educate them to the truth. That is our job.

The auto industry has lobbyists letting the governments know they are in tough times as they fly their corporate jets to ask for handouts, banks that ask for lower interest rates to increase lending as they keep half the spoils for their "operating", packing plants that need restructuring packages to "compete". In the mean time, we look at ways of cutting costs, again, even though prices remain constant or increase in the retail sector.
I agree GF and Kato, until we do something, educate the consumer so they will pressure the government or create a shortage (or at least perceived shortage), we can't really expect anything to change.

[coppertop]

Our 'lobby groups' don't all sing from the same songsheet ! If they did, and if they 'sang' loudly and consistently to all levels of government, perhaps the dollars injected into the industry would be of long term value.

[grassfarmer]

Coppertop, Saying 'our lobby groups don't all sing from the same songsheet' is being rather generous to them in my opinion. Some of our lobby groups, including the biggest, levy funded ones appear to be working entirely against primary producers interests. They are working to achieve the aims of the processing sector to the detriment of the producer interest.
There should be no need for producers to survive on Government injections of money, there is still plenty money created by the beef production process. Allowing processors and retailers to pay half as much for their raw product (fat cattle)as they did historically and pocket the difference is the problem. The tools they use are monopoly control and captive supply. This is what Governments should be acting on and what producers should be lobbying them for action on.

[perfecho]

Rather than reinvent the wheel, is there a group who's mandate or mission is focused on the producer? (Farmer/Rancher)

[coppertop]

grassfarmer, I agree with your views on this.
For instance, when oil started dropping it also started dropping at the pumps, but when the beef producer gets half what they did six years ago, the consumer gets no break at all. The packers have controlled the industry, and until that changes we are at their mercy. Not fair ball is it ?

[grassfarmer]

Perfecho, I believe there is such an organisation - the National Farmers Union. It's national rather than provincial and it represents producers of all agricultural products, something that I think is essential.

From the NFU website;
"NFU members believe that the problems facing farmers are common problems, and that farmers producing diverse products must work together to advance effective solutions. The NFU works toward the development of economic and social policies that will maintain the family farm as the primary food-producing unit in Canada.....NFU members believe that individual farmers must work collectively to assert their interests in an agricultural industry increasingly dominated by multi-billion-dollar corporations."
I think the NFU has much to offer producers of all commodities.

[Sawbones]

GF..While I think that Darren did a great job researching the NFU paper and agree with many of the solutions especially regional producer owned/influenced plants of a moderate size (500 head/day), I can't accept throwing out the FTA (Free Trade Agreement) when we are still trying to export 35-50% of the beef we raise. Mexico is an excellent market for many of our products. I think we have to diversify our marketing to EU or Asia rather than rely on the US. If we are going to throw out FTA and only produce for ourselves, then 35-50% of beef producers will have to sell out. That may already be happening but it's not a good thing.