Borrowing our way to prosperity

[grassfarmer]

Interesting read in this CountryGuide article by Gerald Pilger. News item was farm borrowing in Canada to the end of 2017 was a record $102.3 billion - more than double what farms owed in 2000. Extrapolating averages from the figures quoted indicate that since 2000 gross farm receipts per farm would be @$243,812, net farm income from farm activities was $8300 but another $16,000 came from farm support payments. The debt levels shown in late 2017 would indicate an average borrowing of $518,750. I realize that the averages are made up of all types - hobby farms and full time across all enterprise types but these figures are still rather scary - looks to me like there must be a pile of people running huge debt loads.
A final comment in the article was that farm income in Canada had dropped 1% in the last 8 months while US farm income had dropped 30%!

[Sheepwheat]

Makes sense with the iron I see around here. Land values went up someone said. Borrow to the hilt!!!

[AlbertaFarmer5]

Interesting read in this CountryGuide article by Gerald Pilger. News item was farm borrowing in Canada to the end of 2017 was a record $102.3 billion - more than double what farms owed in 2000. Extrapolating averages from the figures quoted indicate that since 2000 gross farm receipts per farm would be @$243,812, net farm income from farm activities was $8300 but another $16,000 came from farm support payments. The debt levels shown in late 2017 would indicate an average borrowing of $518,750. I realize that the averages are made up of all types - hobby farms and full time across all enterprise types but these figures are still rather scary - looks to me like there must be a pile of people running huge debt loads.
A final comment in the article was that farm income in Canada had dropped 1% in the last 8 months while US farm income had dropped 30%!

While certainly not a trend to celebrate, to put it into perspective, Canadians outstanding mortgages are up well over 3 times in that same time period, and all other consumer debt about the same ratio. I tried to find information on other business's debt levels, but Google isn't cooperating with that, I've got lots of offers of debt remediation and bankruptcy help though... Likely a sign of the times.

Agricultural debt increase is more a function of the era of cheap easy financing than it is a statement about the state of farming or profitability, IMO.

According to an online inflation calculator, the CAD has lost over 35% of it's value since 2000 due to inflation, so that accounts for a large portion of the debt increase right there.

But, at least this answers the previous thread's question about personal expenses. Looks like they are just over $2000/month before taxes for farmers, according to your stats. And apparently that is enough for a cabin at the lake, a boat and all the other toys, and to spend the winter somewhere warm with a second residence there etc. Go figure...

Honestly, without separating the stats as to farm size and full time vs. part time, the numbers are about worthless. For every full time farmer in my neighborhood, there are 20 part time farmers who have no intention of or expectation of a profit, that does skew the stats a lot.

I would like to know where to sign up for my $16,000 in farm support payments though. What would be included in that figure? Agri-invest is the only one I get any substantial funds from, but it is a far cry from $16000 per year. What am I doing wrong, and how do I become a good hypocritical socialist and get my fair share? That must include crop insurance premium subsidies?

[grassfarmer]

I would like to know where to sign up for my $16,000 in farm support payments though. What would be included in that figure? Agri-invest is the only one I get any substantial funds from, but it is a far cry from $16000 per year. What am I doing wrong, and how do I become a good hypocritical socialist and get my fair share? That must include crop insurance premium subsidies?

I would assume Agrinvest, Agristability, crop insurance plus any ad-hoc payments during that period like BSE payments to cattle producers. While looking unsuccessfully for info to answer your question I did find an Ontario auditor generals findings on Farm Support payments in that province. It makes for an interesting read - how some people that don't have a bad year still get compensation and vice versa.

http://www.auditor.on.ca/en/content/annualreports/arreports/en17/v1_305en17.pdf http://http://www.auditor.on.ca/en/content/annualreports/arreports/en17/v1_305en17.pdf

[chuckChuck]

Many farmers like to criticize governments and consumers for taking on too much debt but maybe farmers should look in the mirror?

Any substantial increase in interest rates is going to put many farmers in the red.

Farmers seem to be in denial about significant taxpayer support to their industry.

Without more data on the industry it is difficult to know who is at greatest risk. The big greedy hyper farms gobbling up the neighbors or the average farmer?

Farmers need to decrease their debt levels and cost of production.

[SASKFARMER3]

Boys there are farmers with very little debt. Some have no opp loans and run cash. These farmers are part of the same number so yes some have the farm borrowed to the hilt. Take the big dude at swift with what 100mil blanket loan. that's also in the equation. Why do you think companies like Input Viagra are out there today.

Every one wants to be the big dog so lets borrow to catch the neighbour.

[jazz]

- looks to me like there must be a pile of people running huge debt loads.

That's me. There was no way to start a farm from scratch without debt so I used it. And being a small timer, nobody would rent to me. So my ratios are higher than I would like if it weren't for the price appreciation caused by the psyco BTOs (Monette Farms is beside me), I would have sold a couple quarters to get it in line.

Farmers need to decrease their debt levels and cost of production.

Now that Klause showed us the production opening up in countries that choose not to kneecap industries with taxes, I couldn't agree with this statement more.

[furrowtickler]

Interesting read in this CountryGuide article by Gerald Pilger. News item was farm borrowing in Canada to the end of 2017 was a record $102.3 billion - more than double what farms owed in 2000. Extrapolating averages from the figures quoted indicate that since 2000 gross farm receipts per farm would be @$243,812, net farm income from farm activities was $8300 but another $16,000 came from farm support payments. The debt levels shown in late 2017 would indicate an average borrowing of $518,750. I realize that the averages are made up of all types - hobby farms and full time across all enterprise types but these figures are still rather scary - looks to me like there must be a pile of people running huge debt loads.
A final comment in the article was that farm income in Canada had dropped 1% in the last 8 months while US farm income had dropped 30%!

Cost of land and machinery alone has doubled or more in that time frame .
We could have bought land anywhere around here for $75,000 to $90,000 ... now it’s 4 to 5 x that ....
Grain prices have been relatively stagnant over that time period , leads to more much more debt load .

Be interesting to see the debt per /ac from 2000 to 2018 .

[Oliver88]

Honestly, without separating the stats as to farm size and full time vs. part time, the numbers are about worthless. For every full time farmer in my neighborhood, there are 20 part time farmers who have no intention of or expectation of a profit, that does skew the stats a lot.

Agreed, a worthy study would cover full time farmers only.
Break it down by sector, province, etc.

[fjlip]

You think we have DEBT...have fun watching this blur

http://www.usdebtclock.org/# http://www.usdebtclock.org/#

http://www.usdebtclock.org/world-debt-clock.html http://www.usdebtclock.org/world-debt-clock.html

If anyone knows HOW to understand WHO everyone owes these TRILLIONS to, please inform us!

[AlbertaFarmer5]

You think we have DEBT...have fun watching this blur

http://www.usdebtclock.org/# http://www.usdebtclock.org/#

http://www.usdebtclock.org/world-debt-clock.html http://www.usdebtclock.org/world-debt-clock.html

If anyone knows HOW to understand WHO everyone owes these TRILLIONS to, please inform us!

US national debt is up almost 4 times over the same period that Canadian ag debt doubled. Canadian consumers adding twice as much as farmers (relatively speaking) over the same period. Farmers are the laggards.
Farmers are businessmen(and women) too. When borrowing is cheap, it is not only good business to borrow, but almost a necessity to compete when everyone else is doing the same, or get left behind. That doesn't mean it will end well though...

[checking]

If you are getting by, then why pick on farmers.

Use general population statistics.

44 percent of Canadians live pay cheque to pay cheque while 78 per cent of US workers live pay cheque to pay cheque. Yet, I continue to hear that the US economy is booming. Best to caravan south because we have no economy, and no wealth generation powers in Canada. Well, I guess the explanation is there are 34% that are dead Canadian workers that require a pay cheque to maintain their residence.

On a lighter note, I wonder if buying/subsidizing into solar panels, and an arm"s long list of get on board targeted cost shared goodies to environmental proof (you name it, throw away later products for farms) isn't a large part of the 16 grand.

[shtferbrains]

Doesn't matter how so much what your debt is but how hard it is to make those payments.

2000 is a cherry picked year.

Times had been tough and it was hard to make payments.

That's why the land was 75K.

Few wanted the debt. Or could afford it at the time.

Without a doubt we will see that again.

Don't think we are there yet but things are lining up.

Most won't realize it till a few roll over belly up.

[farmaholic]

I would be concerned with the potential false security of people relying on current "toppy" real estate values.

[bucket]

Doesn't matter how so much what your debt is but how hard it is to make those payments.

2000 is a cherry picked year.

Times had been tough and it was hard to make payments.

That's why the land was 75K.

Few wanted the debt. Or could afford it at the time.

Without a doubt we will see that again.

Don't think we are there yet but things are lining up.

Most won't realize it till a few roll over belly up.

Lenders are not going to go after guys that are under water on their borrowing by land prices drop by 20000 a quarter at the high....there is no equity to take from...the BTOs will be fine...

The guys with equity and stability but some debt are the guys the lender are coming after....because at the end of the day their balance sheets will be easier to look good.....