Some substantial reading

[grassfarmer]

AF5, You seem to be confusing net farm income with unit cost of production. Sure with efficiency gains etc the cost of a bushel of grain or a pound of beef on the hook may be less - we raise more of them and make up the losses on volume as bucket likes to say. To suggest that wheat or beef producers should expect to have ever declining net farm incomes is just crazy - if that's the outcome why would anyone try to improve their efficiency - better just stay in the 1950s.

The argument that agribusiness doesn't make money from me because I pay other farmers for feed, custom work etc doesn't hold water. I'm paying the costs of fertiliser, machinery etc by proxy.

You say there is no income crisis in Agriculture - that graph shows a different picture - when net farm income across all of agriculture drops into negative territory I'd say that denotes a farm income crisis.

I agree the picture is clouded as to who makes their living from agriculture alone. In many cases that's not a choice the farmer can make - off farm work being a necessity for many. Many farm wives work off farm - even on huge scale operations - does that mean their economics don't count in evaluation of farm profitability?

[AlbertaFarmer5]

Maybe I am just wording this poorly, can someone else chime in and let me know if I am making sense?


I'll try it a different way. If in 1900, it took 100 farmers to farm 100 quarter sections, and each of them made an inflation adjusted profit of $100,000, it would be a total income of $10,000,000. If in 1960, there were 10 farmers farming 10 quarter sections each, and they each made $100,000, that would be a total of $1,000,000 dollars. If in 2019, 1 farmer is farming all 100 quarter sections, and still making $100,000, that is a total of $100,000. The farmer didn't get poorer, his net income didn't drop, it was his productivity that went up. If you take the chart, and also draw a line indicating the number of farmers, you will find that it drops at a much steeper rate than the net profit, because net profit per producer has been going up, albeit with bumps and potholes along the way.

Now, if government were to orchestrate or fund a program to boost net farm incomes to the same level they were in some period of the past, and arrange it so the single farmer now makes $10,000,000 per year in profit( equal to the 100 farmers from 1900 who he replaced), I think the tax payers and consumers will up in arms about it. And everyone and his dog will desire to become a farmer themselves to earn a piece of that windfall, and unless you also place price controls on land, and rent, and restrict new entrants, the lone farmer is going to find out that everyone else is willing to do it for a fraction of that, and they will compete to outbid themselves until the profit is right back to the bare minimum it takes to make a living.

[AlbertaFarmer5]

AF5, You seem to be confusing net farm income with unit cost of production. Sure with efficiency gains etc the cost of a bushel of grain or a pound of beef on the hook may be less - we raise more of them and make up the losses on volume as bucket likes to say. To suggest that wheat or beef producers should expect to have ever declining net farm incomes is just crazy - if that's the outcome why would anyone try to improve their efficiency - better just stay in the 1950s.

The argument that agribusiness doesn't make money from me because I pay other farmers for feed, custom work etc doesn't hold water. I'm paying the costs of fertiliser, machinery etc by proxy.

You say there is no income crisis in Agriculture - that graph shows a different picture - when net farm income across all of agriculture drops into negative territory I'd say that denotes a farm income crisis.

Except it is not negative today, Darrin repeats over and over that it is positive 5%. That may not be adequate if you have a 5 digit gross. It might be a windfall if you have an 8 digit gross. Anecdotally, ( and I may have this completely wrong in many cases) seeing the houses and vehicles, and holidays, and toys, that most of the more or less full time farmers are flaunting, I'm guessing their numbers are higher than 5%. And by extension that there are an awful lot of hobby operations who qualify as farmers for tax purposes, but have no intention of showing a profit. I know of many who see the farm as a way to lower the tax bill on their main source of income, the farm will lose money in perpetuity, it makes no sense to me, but it does to them.

[AlbertaFarmer5]

And a comment on the debt. He provides a big scary number, and compares it to a previous date, but otherwise it is without context. The proper context would be debt to equity ratios. I can't find any long term ratios, but today's ratio is below both the 10 year and 15 year average ratio. Assets have increased in value faster than debt has been. I'll keep looking for older data.

And every source i've seen indicates that land values have been the biggest driver of both increases. That doesn't necessarily make it sustainable, if land values don't continue their meteoric rise, but it isn't a sign of a crisis, it is a sign that farmers are responding to market signals. Cheap interest, strong returns( appreciation, and profit) are driving farmers to invest in land. And with cheap interest, it makes more sense to pay the interest, and invest in the farm, than pay down the loan. Interest rates have been lower than land appreciation for so long now that it actually paid to have a mortgage on farmland. This isn't the equivalent of payday loans and credit card debt, this is mainly debt that was invested in productive and appreciating assets. I found an interesting chart that shows a very high historical correlation between farm debt levels and land prices, not surprising.

How does farmer debt compare to consumer debt growth over that same period? What about other business sectors, or governments? Consumers and governments have absolute debt growth that is even scarier, except they didn't invest it in productive assets.

[AlbertaFarmer5]

AF5, You seem to be confusing net farm income with unit cost of production.

I was reading the source of the figures right out of the report you posted, no confusion. Except, the report does not list net farm income per producer, only net farm income for the sector, which requires some extrapolation.

[chuckChuck]

"So chuck your advocating the govt get into how much farmers should produce?"

Mallee. In Canada the government already does this with quota for supply management programs for dairy and poultry products along with a cost of production formulae for pricing. They also use import tarrifs to stop low cost dumping from depressing the market.

And supply management farmers don't consider themselves socialists. Most Conservatives support these programs as well.

I doubt that there is much support for limiting production in many other commodities.

But the US and Canada both used set aside programs in their past that were tied to subsidies.

The input and grain handling sector won't support any reduced production programs.

The spend to the max and system isn't working so well. With over a $100 Billion in debt, Canadian farmers are in a very vulnerable position if profit remains elusive.

Debt to equity may be okay now but if and when land values start declining which happened in the 1980s then all hell will break loose.

[grassfarmer]

Except it is not negative today, Darrin repeats over and over that it is positive 5%.....

Neither of us know if net farm income is negative for 2019. It may be as it was in the 2-3 year period shown on the diagram. Negative net farm income across the industry - that is a farm income crisis by any measure. The 5% that Darrin quotes in the text immediately under the diagram is the % of gross revenue that the farmer retains - that is not the same as saying net farm income is a +5%.

[AlbertaFarmer5]

I doubt that there is much support for limiting production in many other commodities.

Then why did you bring it up as your first solution to all the issues in the report? Is there any other commodity that we currently export that no one else in the world could provide cheaper if we converted it to SM? Are there any commodities which we consume entirely within the country which could benefit? Without looking up the data, I'm suspecting possibly cannabis might be a candidate, certainly none of the main field crops, or livestock without feathers.

[AlbertaFarmer5]

Neither of us know if net farm income is negative for 2019. It may be as it was in the 2-3 year period shown on the diagram. Negative net farm income across the industry - that is a farm income crisis by any measure. The 5% that Darrin quotes in the text immediately under the diagram is the % of gross revenue that the farmer retains - that is not the same as saying net farm income is a +5%.

No, it isn't, because the numbers do not include program payments. Also, if you follow the references to the statscan tables he provides, it does break down what is and isn't included. And the only income included is Crop receipts and Livestock and livestock product receipts.
https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3210004501 https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3210004501
So that is not inclusive of custom work, oil, gas, aggregate lease revenue, rental revenue, etc. But expenses related to those activities would be included in the expenses put towards net income calculations. Here, land prices include a premium for the lease revenue for example, or what portion of fuel, repairs and depreciation are for custom work?

So after much manipulation of the data, he arrived at the 5%, and shows some years being negative, but if you go back to statistics Canada data that he started with, no years are negative(although it was very close in 2006), and the average is much higher than 5% ( I didn't work it out yet).

https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3210005201#timeframe https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3210005201#timeframe

I tried to find how they treat corporations without success. An increasing number of profitable farms are incorporated(no point in incorporating if not profitable), and the farmer is paid in various creative ways that become expenses to the corp. The farm could show no net income, but the farmer doing very well, or vice versa, how is that captured?

He did a very simplistic analysis, with cherry picked data, with a predetermined outcome. That doesn't make it a crisis.

That makes it a solution looking for a problem.

[chuckChuck]

Then why did you bring it up as your first solution to all the issues in the report? Is there any other commodity that we currently export that no one else in the world could provide cheaper if we converted it to SM? Are there any commodities which we consume entirely within the country which could benefit? Without looking up the data, I'm suspecting possibly cannabis might be a candidate, certainly none of the main field crops, or livestock without feathers.

I didn't bring it up as a solution only as an option we already use to show that farmers can unite and work together.

Why don't you call the supply managed farmers "socialists" with their state run marketing boards and regulations? And Andrew Scheer who was elected leader based on Quebec dairy farmers support? He must be a socialist too! LOL

Its you favorite catch all phrase! You use when it its not accurate and then not use it when it is accurate! Try to figure this out.

[AlbertaFarmer5]

I didn't bring it up as a solution only as an option we already use to show that farmers can unite and work together.

Why don't you call the supply managed farmers "socialists" with their state run marketing boards and regulations? And Andrew Scheer who was elected leader based on Quebec dairy farmers support? He must be a socialist too! LOL

Its you favorite catch all phrase! You use when it its not accurate and then not use it when it is accurate! Try to figure this out.

We were trying to keep this as a productive civil conversation about how to improve agriculture, and discussing if there really is a crisis to start with. I politely asked you in which sectors SM could be a potential solution, and even offered a suggestion, never said anything negative about the existing SM sectors, which are working very well for supplying the domestic market at fair prices for all parties. Not sure why that necessitated the preceding rant about socialism. If you do a search of the thread, Bucket warned you that you might get called a Socialist, and you have used the term multiple times since then, not me.

Do you have any insights to offer on the farm income crisis, or if it is a crisis, or the solutions offered in the NFU paper?

[AlbertaFarmer5]

Grassfarmer, to be fair, just because I don't agree that farm income is in a crisis, doesn't mean that I don't think that there is room for improvement, and that is why I really do appreciate you posting this and offering solutions. That is a very pleasant change from the constant whining on Agriville.

And after all of the discussions about the west's financial situation I have been having with Chuck and others, where I keep pointing out that it isn't about how bad it is, but about how good it could and should be, it would be hypocritical of me to not take the same stance on Agriculture. Of course it can always be better, and we need to look for ways to improve.

On that note, I agree that there likely are opportunities for farmers to capture more of the margins that our input suppliers, and commodity purchasers, processors, exporters and transportation sector, etc., currently enjoy. That either requires cooperation, or government intervention(gasp).

In this era, there are massive opportunities to pursue some version of sustainable production, with organized marketing of a differentiable product on both the local and world marketplace, instead of raw bulk commodities competing with the lowest cost producers in the world. Ideally I'd like to see that as a made in Canada( or whatever region we end up devolving into), solution, based on actual science and genuine sustainable practices, not the arbitrary, unsustainable system that is the current organic regime.

If I thought there were a viable path back to 1950, with a mixed family farm on every quarter section(minus all the back breaking hard work, and lack of modern conveniences), all profitable, sustainable, and still able to maintain our status as an export powerhouse, I would be all for it. But I don't see that happening in the bulk commodities business.

And as for uniting farmers, all you need to do is look at this site to see how futile that will be. On a daily basis we are reminded that it is, Grain farmers against livestock farmers, and Supply Managed farmers against open market farmers, and CWB supporters against free market supporters, and family farmers against BTO's, and BTO's against really big BTO's, and really big BTO's against the 100,000 acre farms, and western farmers against eastern, and everyone against Quebec, and Organic against chemical free, vs. conventional, and on and on and on. No wonder the government walks all over us(to say nothing of our foreign competitors, and agribusiness), and ignores our concerns, if we can't even present a united front from one size of producer to another, let alone all the other divisions.

Given the attitude of the overwhelming majority of farmers towards the climate crisis, offering a solution all tangled up together with climate, likely isn't the best place to start uniting them behind a common cause.