How Are Canadian Farmers Doing It, Without Any Semblance of a Risk Management Plan?

Before the winter of 2006 I never got press releases. However, ever since the “grass roots” farmers came along, I get press releases. They are Canadian patriots, great guys working their own way for a better Canadian agriculture. On July 1st the Ottawa grass roots farmers are taking that message back to Parliament Hill in Ottawa. I appreciate every one of them. Here is a sample from their latest press release.

“Once again we, Canadian farmers find ourselves with a crop in the ground and not much hope of making a profit. Promises were made by both levels of Government and not kept. Surprise!!! Surprise!!! The provincial budget came out with an actual decrease in funding for agriculture. Then the federal budget came out with lots of money for agriculture, but once all the hype and the dust settled we had nothing. No money to pay for inputs, no risk management program, nothing. There is a slight chance we will see some money come freeze up. (Or is that when hell freezes over). It is a sure bet that the average civil servant working at Ag Canada will receive more money from the budget for their program, then the average grain producer.”

As many of you know I was part of five different farm rallies this past winter with the grass roots farmers. They made a great contribution to Canadian agriculture and they certainly “cut to the chase” when it comes to the lack of government support for farmers. If government feels they will go away, they will surely be mistaken.

The fight for a renewed long term, consistent and well-funded agricultural safety net for grains and oilseed producers continues. In the meantime everybody has to find a way to survive on their farms. Subsidizing the price of food has never been so costly for many farm families.

It begs the question, “How are farmers doing it, without any semblance of a safety net.” From an agricultural economics standpoint, things are much worse now in late June than they were last winter.

At first glance it’s pretty obvious. It’s taking great gobs of equity and great gobs of off farm income for farm families to continue working on Canadian grains and oilseed farms. That’s a problem because there surely is a finite source of equity and at a certain point there is a trade off between off-farm income and farming itself.

You might say how is this being sustained by banks and other lending institutions across the land? In simple terms with the combinations of high land prices, relatively low interest rates and some government support payments, financial institutions are seeing their way. That might mean they are asking farmers to “re-mortgage” property, but in their tunnel vision that works. As long as payments are being made through off-farm income sources everything works.

The problems with this are obvious to farmers. Everybody is winning except them. The government gets their wish to provide cheap food to the consumer with limited transfers to farmers. Lending institutions get their money, having shed farm accounts in droves over the last few years. The farmers are left working with farm prices, which are way below the cost of production.

Yes, some of it might also be what I was talking about last week, farm productivity. Believe it or not there are probably some who think they are thriving when at the end of the day they are simply subsidizing the cheap cost of Canada’s food supply. It is what it is.

Somebody once told me farming is always in a cycle of continual cycles. From this I’m supposed to take it that we are in one of the lower ends of one of those cycles. I have lived too long and seen too much to write that off. As one-grain trader told me last week, he had talked to another trader at the Cbot who believed in the ethanol “gold rush” mentality. He said we’re about to see $5 and $6 corn futures.

When I heard that I started laughing uncontrollably. However, regardless of how funny I thought that was, there are some in this agricultural economic world who believe that. Hope springs eternal in farm country. Talk like that inevitably filters down into Canadian farm country.

At the end of the day there are some very good “public policy” reasons not to farm this way. This I believe is what the grassroots farmers and commodity groups are asking for in Ontario with RMP. (Risk Management Plan) Ditto for the other provinces. Good public policy is a solid, long term and well-funded agricultural safety net like RMP. There is a limit to farmers’ propensity to survive without it.