GETTING TOUGHER FOR CDN FARMERS TO COMPETE...High debt loads and over
capitalization are making it increasingly difficult for Canadian farmers
to compete in commodity markets, an agricultural economist says. George
Brinkman of the University of Guelph said Canadian agriculture should be
shifting its focus from commodity markets to specialty niche markets where
farmers can actively seek out what the customer wants, and then go to work
at providing it. We've got to distinguish our product from somebody
else's, so we don't compete exclusively on price, Brinkman said. Because
we're going to have a real hard time competing on price when we have such
a high capital structure.
Easier said than done.
Brinkman spent the last year comparing the debt and income levels of
farmers both here and south of the border. He says Canadian producers
carry approximately four times the debt of their American counterparts,
and over the past number of years have spent nearly three times as much on
capital investment. As a result, Brinkman said Canadian farmers...who he
described as much more likely than US producers to buy additional farmland
rather than rent it...have become more vulnerable to a potential rise in
interest rates.
We're really over capitalized, he said. We've got way more capital
investment (than American farmers) and that capital has a huge carrying
cost. The bottom line is Canadian farmers are paying way too much for land
relative to what it will generate in terms of income.
Given that over-capitalization, Brinkman said the old adage that North
American farmers are the most efficient in the world no longer holds true.
For example, in the production of oilseeds, farmers in Brazil are
knocking the daylights out of farmers here, he said. If you look at the
capital to income ratios...100 to 1 in Canada, 35 to 1 in the
States...what do think they are in Brazil...10 or 15 to 1
The future of Canadian agriculture is we've got to focus very heavily
on marketing. We've got to move from commodities into products. We've got
to be able to do niche marketing around the world.
capitalization are making it increasingly difficult for Canadian farmers
to compete in commodity markets, an agricultural economist says. George
Brinkman of the University of Guelph said Canadian agriculture should be
shifting its focus from commodity markets to specialty niche markets where
farmers can actively seek out what the customer wants, and then go to work
at providing it. We've got to distinguish our product from somebody
else's, so we don't compete exclusively on price, Brinkman said. Because
we're going to have a real hard time competing on price when we have such
a high capital structure.
Easier said than done.
Brinkman spent the last year comparing the debt and income levels of
farmers both here and south of the border. He says Canadian producers
carry approximately four times the debt of their American counterparts,
and over the past number of years have spent nearly three times as much on
capital investment. As a result, Brinkman said Canadian farmers...who he
described as much more likely than US producers to buy additional farmland
rather than rent it...have become more vulnerable to a potential rise in
interest rates.
We're really over capitalized, he said. We've got way more capital
investment (than American farmers) and that capital has a huge carrying
cost. The bottom line is Canadian farmers are paying way too much for land
relative to what it will generate in terms of income.
Given that over-capitalization, Brinkman said the old adage that North
American farmers are the most efficient in the world no longer holds true.
For example, in the production of oilseeds, farmers in Brazil are
knocking the daylights out of farmers here, he said. If you look at the
capital to income ratios...100 to 1 in Canada, 35 to 1 in the
States...what do think they are in Brazil...10 or 15 to 1
The future of Canadian agriculture is we've got to focus very heavily
on marketing. We've got to move from commodities into products. We've got
to be able to do niche marketing around the world.
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