For years now, the death knell has been ringing for western Canada’s farmers. We’ve been told the dismal news for years. Commodity prices are on an unstoppable downward trend. The family farm is dying. Rural life is withering, symbolized by the disappearing grain elevators which once dotted the prairie landscape.
But now, quite unexpectedly, western farmers are seeing soaring prices for wheat, barley, canola and just about anything else that grows in the dirt. The reasons for global price increases are a bit complex: a mix of rising demand in China, increased popularity of biofuels and growing demand for livestock feed. But whatev- er the reasons, western Canada’s farmers are smiling for the first time in many years.
According to Agriculture and Agri-Food Canada, total cash receipts from all sources (including crops, livestock and support payments from provincial and federal governments) are expected to top $42.5 billion this year in Canada. That’s up 6 percent from 2007, and 18 percent above the five-year average.
Is this a reprieve for western farmers? Can farming once again be a viable career choice for the young son (or daughter) who is heir to the farm?
First of all, we cannot be certain for how long crop prices will remain high, nor at what level they may settle. Forecasting any commodity price is a mug’s game at the best of times, but in this case we can be fairly certain that prices are likely to ease at least a bit. The high prices are acting as an effective signal to farmers around the world to boost supply. And that, weather per- mitting, will help push prices down.
Even if prices fall somewhat, it is also a good bet that global demand will also remain firm. Biofuels and rising incomes in China appear to be here to stay as well. So while prices may correct downward a bit over the next few years, the world should prepare for a new environment of generally higher grain and oilseed prices in the future.
Yet the overall higher prices are not likely to save the traditional fam- ily farm in the long run. Ironically, it’s likely that the currently high prices for grains and oilseeds may has- ten its demise.
For one thing, while output prices have risen, so have input costs. Fertilizers, fuel, seed and even labour costs have kept pace with the crop receipts and in some cases have exceeded them. That means farmers’ margins are being pinched. Without the large purchasing leverage and capacity of the corporate farms, the lit- tle guy is taking a disproportionately nasty hit on costs.
Secondly, farmland prices are also rising at the moment. A study by Farm Credit Canada indicates that farmland prices across the Canadian prairies have risen by more than 10 percent in Alberta, and by nearly that much in Saskatchewan and Manitoba. For the typical Canadian farm owner " near- ing retirement, fed up with the cycle of grain prices " cashing in on the value of the land has rarely been so attractive. Options to sell the land and rent back the residential property, or even to keep the property but rent it out to a larger operation, may be very appealing.
Thirdly, not all Canadian farms are currently enjoying a windfall in commodity prices. While crop prices are high, cattle and hog prices are soft. Worse still for the livestock farmer is that input costs are rising nonetheless, especially for feed. With the price of land also rising, the impetus to cash in will be compelling.
It is not that the family farm is going to vanish overnight. And cer- tainly many young farmers may well choose to pursue the career simply because of lifestyle. The line ”œIt gets in your blood” seems to apply to agricul- ture more to than to any other career choice (no one says that about accountancy or economics). And the more agreeable price environment at the moment may well encourage some totrytomakeagoofit.
But the basic trend in western agri- culture toward fewer family farms and more corporate and large opera- tion farming will not be derailed. In fact, the higher commodity prices will only make corporate farming even more profitable than before. Corporate farms will enjoy the same benefits of higher prices but suffer less from the impact of higher input costs.
So while agriculture in general is on a much more solid footing in 2008, the same cannot be said of the traditional family farm. Farm sizes will likely continue to rise as the number of farms falls. Land under production across the prairies will likely expand as the corporate players make use of even the most marginal properties. Higher input costs, com- petition from corporate farming and rising land values present an enticing cocktail of reasons for many farmers to call it quits.