Just put it on my tab

By Yasmin Schuermann

As a course lecturer in the farm management and technology (FMT) program, you are without a doubt overhearing the ongoing debates over the best brand of tractor, whether it be a John Deere or a Massey Fergusson, I will let you decide. Another topic, that my FMT year 1 students enjoy covering, include a very passionate quest to purchase more farmland. As these conversions go on, I can see their excitement as some plan to take over the family farm, while others debate starting their own operations. However, their conversations lead me to see an endless stream of dollar signs spiralling around my head.

Can we afford our farms? Can we start a farm? These are simply a couple questions that today’s farmers need to be asking themselves.

Looking at the current financial situation in the Canadian agricultural sector, the total net farm income rose 7.6% and the total farm asset values have risen by 5% in 2016, while that same year the outstanding farm debt saw a 7.3% increase, which ultimately puts the current total Canadian farm debt to $95.9 billion (2016) (FarmCreditCanada, 2017c). Figure 1 adequately depicts the staggering increase in farm debt in the last few decades (StatisticsCanada, 2017b). Nonetheless, this rise in debt should not come as a shock, as it is in large part due to the increasing farmland values. Drivers of higher farmland values include low interest rates and weak Canadian currency, which in turn led to a higher demand for Canadian agricultural products (FarmCreditCanada, 2017a).

National farmland values have seen annual increases since 1993 and from 2016 to 2017 alone there was a 7.9% rise. Although the current trend appears to be going towards slower growth due to lower prices for global field crops(Atkins, 2017), the overall farmland values in the last twenty odd years has been booming. In the past 4 years, in Quebec alone, the increase in farmland resulted in a whopping 2 103$/acre (StatisticsCanada, 2017a). Today, farmland values represent almost 70% of total farm assets (FarmCreditCanada, 2017c) and there appears to be no constraint on how much some are willing to pay for this particular asset. However, the risk of increasing interest rates or decreasing revenues and the volatility of commodities being produced need to be factored in when inquiring about farmland purchases. Especially, when more often than not, the production values are lower than the farmland values (Pilger, 2014).

Those interested in borrowing to purchase farmland have access to many financial programs through lenders including Farm Credit Canada (FCC) and Financière Agricole du Quebec. On the one hand, the annual reports produced by FCC and the Canadian government suggest that the farm debt situation is sound, as long as farmers have access to risk management tools and their field commodities are sold at reasonable pricing (FarmCreditCanada, 2017b; Finnigan, 2017). On the other hand, you come across individual economists such as Dr. George Brinkman, warning that there is simply insufficient farm income to pay off the escalating debt that farmers have accumulated, which is among the highest worldwide (Pilger, 2014). Moreover, the National Farmers Union have expressed their concern for farmers that supplement income with off-farm employment and young farmers uncomfortable with acquiring high levels of debt (Holtslander, 2015).

Predictions are made with respect to farmland values and farm revenue, but there simply are no guarantees to assure that farmland maintains its worth. Farmland values appears to be a growing bubble, which can burst at any time and then what? Furthermore, we must not forget to assess political decision that affect sustainable farming, whether it be changes in the North American Free Trade Agreement or signing the Trans-Pacific Partnership. Let us ask ourselves, how much debt can the agriculture sector add to its tab?


Atkins, E. (2017). Growth slows for Canadian farmland value amid declining field-crop prices. THE GLOBE AND MAIL. Retrieved from https://www.theglobeandmail.com/report-on-business/growth-slows-for-canadian-farmland-value-amid-declining-field-crop-prices/article34648014/ (accessed: February 2 2018)

FarmCreditCanada. (2017a). 2016 farmland values in Canada: 3 things you should know. Agricultural Trends. Retrieved from https://www.fcc-fac.ca/en/ag-knowledge/ag-economics/2016-farmland-values-in-canada-three-things-you-should-know.html(accessed: February 1 2018)

FarmCreditCanada. (2017b). Farm Credit Canada: 2016-17 Annual Report. Retrieved from https://www.fcc-fac.ca/content/dam/fcc/about-fcc/reports/annual-report-2016-17.pdf(accessed: January 29 2018)

FarmCreditCanada. (2017c). FCC Ag Economics: Outlook for Farm Assets and Debt 2017-18. Retrieved from https://www.fcc-fac.ca/content/dam/fcc/knowledge/ag-economist/farm-assets-and-debt-report-2017-18-e.pdf(accessed: January 29 2018)

Finnigan, P. (2017). Report of the Standing Committee on Agriculture and Agri-Food. Retrieved from http://www.ourcommons.ca/Content/Committee/421/AGRI/Reports/RP8988753/agrirp07/agrirp07-e.pdf. (accessed: February 2 2018)

Holtslander, C. (2015). Losing our grip 2015 update: How to corporate farmland buy-up, risingfarm debt, and agribusiness financing of inputs threaten family farms. Retrieved from http://www.nfu.ca/sites/www.nfu.ca/files/Losing Our Grip – 2015 Update_med.pdf. (accessed: February 3 2018)

Pilger, G. (2014). Farm debt ratio in Canada could create and agricultural ‘bust’. CountryGuide.

StatisticsCanada. (2017a). Table 002-003 – Value per acre of farm land and buildings, ay July 1, annual (dollars ).

StatisticsCanada. (2017b). Table 002-0008 – Farm debt outstanding, classified by lender, annual (dollars).

One response to “Just put it on my tab”

  1. Abu Mahdi Mia says:

    The tittle is a great hook that makes the reader want to read further yet it doesn’t give off too much information which keeps the reader intrigued.

    This article brings up the topic of the ever-growing costs of owning a farm and how it is becoming more and more unaffordable to start farming. Demand for farmed goods are increasing due to the lowering of the Canadian currency however, the increasing cost of land, interest rates from loans and volatility of the market makes it more and more risky for farmers to commit into the lifestyle.

    The author gives very good examples of current Canadian resources that are actually involved in the farm’s financial sectors such as Farm Credit Canada and she also gives fact based statistics on the rise in values of land which further strengthens her arguments.

    I believe that she could strengthen her take home message if she showed some statistics from failing farms as there should be lots of reports on them. This would put into perspective how hard it actually is to have a profitable farm these days.

    The author shows that Canadian farmers have some of the greatest depts. Worldwide which, just puts that much more emphasis on all her arguments.

    This was a great post that was very interesting to read, I couldn’t think of putting anymore in a 500-word blog!

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