The ‘poor farmer’ an urban myth

Lawrence Solomon
National Post
January 25, 2000

High net worth puts farmers ahead of average Canadians

Higher, higher, higher! The net worth of a Canadian farm — what the farm’s worth after all the debts are paid — keeps climbing and climbing, from $550,000 in 1993 to $620,000 in 1995 to $650,000 in 1997, the last year for which Agriculture Canada has data. Potato farms top the scale, averaging almost $1.2-million. Poultry farms also have net worths of more than $1-million, and dairy farms, at an average of $960,000, come close behind.

While farming has hard-luck stories — what large sector doesn’t? — on the whole it should be grinning from ear to ear. Hog farmers saw their farms’ net worth increase by a whopping 50%, from just over $500,000 in 1993 to $750,000 four years later. Grain farmers’ net worth rose almost 30% in that period, to $630,000. Even beef farmers — the least prosperous of farmers — have farms whose net worth exceeds $530,000.

Farm prosperity is not isolated to one region; it’s evident from coast to coast. Atlantic Canada is the country’s poorest region, but Atlantic farmers — with farms having a net worth of $620,000 — are doing well. Likewise on the Pacific coast. While the B.C. economy has fared poorly all the past decade, B.C. farmers are Canada’s wealthiest, with an average farm’s net worth more than $900,000. Quebec farmers, averaging a net worth of $530,000, are the country’s least prosperous.

In the ongoing controversy over farm aid — the Prairie provinces want more than the $1-billion package the federal government favours — no one mentions farm assets. Advocates for more generous farm subsidies cite farmers’ low incomes, not their wealth, and they point to grain farmers, whose profits happen to be down this year. “There are some sectors, like poultry, dairy and egg farmers, that are doing fairly well, but our grain farmers are going through hell,” pleaded Toronto MP Dennis Mills, the organizer of last week’s nationally televised Family Farm Tribute benefit concert. According to the Saskatchewan Farm Income Coalition, Prairie farmers face the most severe economic crisis since the Great Depression, with one-third of Saskatchewan’s 50,000 farmers in danger of going bankrupt this year.

This is not the Great Depression. Prairie farmers may not be having a bumper year, but they are on solid ground. The average grain farm in Manitoba and Saskatchewan — the ones we see so often on the nightly news — has appreciated 30% in net worth since 1993. It carries a modest debt — 15% of its $700,000 market value. The debt carried by the average Prairie hog farm is also modest — 20% of its $1.3-million market value. Prairie farmers are not overextended. Farm bankruptcies on the Prairies — always low by business standards, even during the last Prairie farm crisis in 1991 — occur at about one-tenth the rate non-farm businesses fail. This time around, Prairie farmers have deep, deep pockets in the form of record-high equity in their farms.

Neither do farmers suffer from a chronic income shortage. The average farm family’s income — $53,121, according to the 1996 census — is close to the average of $54,562 for all Canadian families. The family farm’s income resembles the average family’s income in another way, too. Neither especially depends upon farming to make ends meet.

More than 80% of the income farm families make comes from non-farm activities — non-farm work, their investments, pensions, and other activities unrelated to farming. Only 20% of farm families get at least half of their income from the farm, and only 8% get 75% of their income from the farm. For the majority, the farm is their home and their nest egg, but their outside work puts the bread on the table. More subsidies may encourage family farms to bring more land under cultivation — these farms have been steadily increasing in size — and may increase the farmer’s net worth. But because subsidies influence a small proportion of a farmer’s total income, even large subsidies will have little effect on the farm family’s total income.

In the public’s fixation on the plight of the family farm, it has forgotten those who fill the seats at the benefit concerts, and those who make the subsidy payments. The net worth of the average Canadian household — including its home, if it’s lucky enough to have one, and its business, if it’s lucky enough to have one — is about $250,000. If farmers had no possessions apart from their farms, they would be two to three times as wealthy as the rest of us. Because farmers do have other investments — 77% hold stocks, bonds or other securities; because they do own other businesses — about 60,000 non-farm businesses, or one for every 3.5 farms; because farmers do own annuities, RRSPs and other pension assets; and because farmers do have personal property, the average farm family’s net worth is higher, and may well top $1-million.

And yet — through some kind of mass self-deception — farmers have somehow convinced themselves they’re entitled to receive aid from those less well-off. And somehow those less well-off, thinking the farmers from away more worthy of their charity than the truly needy nearby, have agreed.

Responses to: The ‘poor farmer’ an urban myth

In defence of the ‘poor farmer’
Financial Post, February 4, 2000

How do you explain comparing the household net worth of Canadians against the net worths of farms? If you compared the net worth of farms to those of any other long-term business ventures that provide a necessary commodity, oil and gas companies or lumber companies might be a more reasonable comparison.

Farms are highly capitalized businesses that provide food to the country at below the cost of production. This practice can not go on forever. Is it expected that farmers liquidate their assets? How do you propose they survive at farming if they have to sell off assets which are more than likely necessary to do a proper job? Of course, over time, farm size will increase. This is a natural progression. But if the margins in farming do not increase also, we are all in trouble. It is estimated that three in five jobs in this country are somehow related to agriculture.

Do you not see the correlation of a strong farm sector with the economic well-being of the country? A nation is only as strong as its ability to feed itself.

Tim Calon
Drumheller, Alta.

__________________________________________________

In defence of the ‘poor farmer’
Financial Post, February 4, 2000

I want to restate your facts: – Farm worth $550,000 in 1993; farm worth $650,000 in 1997; – More than 80% of farm income from non-farm activities; – Average farm income $53,121 (1996).

My translation: The average farm gained 100,000, or 18%, over four years. Less than 20% of farm income comes off the farm; therefore, less than $10,625 comes off the farm. Using the above information, the gain in the average farm net worth from 1993 to 1997 just kept ahead of inflation. This investment, which at a minimum kept two people busy (two man years), earned a farm couple less than $10,625 ($5,300 each). For one year of very stressful work, putting up with long hours during harvesting, seeding, working with dangerous chemicals, stress of crop prices, stress of crop yield, and financial concerns with the ongoing farming earned a person $5,300.

That doesn’t quite put a roof over your head or food on the table. Most farmers, for the love of the land, will work a second job, as your facts reveal, so they may enjoy the farm and its many intrinsic rewards. It is too bad you have no idea of this concept.

Please let me know where, for a $650,000 investment and working for a year, I can earn $5,300. Any business in this category won’t last long.

Vernon Steiner
Lac Du Bonnet, Man.

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