Lawrence Solomon and Jessica Zippin
June 22, 2000
|For every dollar that a Canadian farmer earns, the federal and provincial governments provide $3.55 in subsidies. By this measure, Newfoundland’s farm economy has been the most heavily subsidized over the last decade, with Ontario following closely behind. British Columbia and Prince Edward Island have been the least subsidized, with a farm subsidy ratio of approximately two.|
|Central Canada has the highest farm subsidy ratio, and it is the only region to exceed the Canadian average. Eastern and Western Canada have farm subsidy ratios about 15 percent lower than the national average.|
|From 1994 to 1999 the ratios have remained quite consistent, ranging from approximately 1.3 to 2.9. However, in 1991 and 1992 great variability was seen in farm subsidy ratios. A low adjusted total net income contributed to a relatively high farm subsidy ratio in 1991. The ratio for 1992 is not represented because the adjusted net income was negative.|
|The farm subsidy ratios have been declining over the last 10 years for the Eastern Provinces, indicating that the inefficiency in eastern Canada’s farm economy has been declining relative to the inefficiency of the Canadian farm economy as a whole.|
|Both Ontario and Quebec had higher farm subsidy ratios than Canada for eight of the 10 years. In 1992, neither the Central Provinces nor Canada showed a positive farm subsidy ratio because the “net payments to producer” exceeded their “total net income”.|
|In four of the 10 years, Western Canada had farm subsidy ratios ranging between one and three. Only in 1991 and 1993 did Canada have a higher farm subsidy ratio than the western provinces.|
|Over the last decade, Newfoundland had Canada’s highest farm subsidy ratio, with a ratio approximately twice the national ratio. In 1990, Newfoundland experienced an extremely low total net income, leading to a high farm subsidy ratio.|
|Prince Edward Island had Canada’s second lowest farm subsidy ratio over the last 10 years. In 1995 and 1999, farm subsidy ratios were less than one due to comparatively high adjusted total net incomes.|
|Apart from 1991, over the last decade Nova Scotia’s farm subsidy ratio did not fluctuate greatly. As well, it remained fairly consistent with Canadian farm subsidy ratios.|
|New Brunswick had a farm subsidy ratio similar to that of Canada’s over the last decade, apart from 1998 when the ratio was almost four times Canada’s ratio. This was a result of New Brunswick having the lowest adjusted total net income of all the provinces.|
|Quebec has Canada’s third highest farm subsidy ratio over the last decade. Except for 1991 and 1997, Quebec had a higher farm subsidy ratio than the rest of the provinces. In 1997, Quebec received the greatest government transfers of all the provinces; it also had the highest adjusted total net income, giving it a low farm subsidy ratio.|
|With the exception of 1991 and 1992, Ontario had higher farm subsidy ratios than Canada over the last decade. With respect to total net income, Ontario received relatively high subsidies compared to the rest of the provinces. In 1999, the farm subsidy ratio increased relative to the past five years due to a large increase in the net payment to producer.|
|In 1999, Manitoba’s farm subsidy ratio increased due to the province’s low adjusted total net income. In the same year, in contrast, Newfoundland had a similar adjusted total net income but only received a tenth of the government transfers that Manitoba received.|
|Canada’s farm subsidy ratio exceeded Saskatchewan’s every year except for 1997, when the government transfer was relatively high and the total net income was low. In 1991, Saskatchewan also received a relatively high government transfer resulting in the second highest provincial farm ratio.|
|Over the last decade, farm subsidy ratios in Alberta have tended to be lower than Canada’s ratio. However, in 1990 Alberta had a significantly higher farm subsidy ratio than Canada due to a relatively low adjusted total net income.|
|British Columbia had Canada’s lowest farm subsidy ratio over the last decade. Its ratio is approximately 40 percent lower than Canada’s farm subsidy ratio. In the last three years, the farm subsidy ratio has been declining due to an increase in adjusted total net income.|
|The data used in this study is drawn exclusively from Statistics Canada and Agriculture and Agri-Food Canada’s Data Book. The data has various inconsistencies and omissions. For example, since 1996 Agriculture and Agri-Food Canada has placed a moratorium on the measure of government transfers from property tax concessions, with results for previous years removed from the data series. Previously, transfers from rebates and exemptions were measured for all provinces except Newfoundland by counting the rebate paid to farmers and by estimating the value of exemptions granted to farm property. During 1994/95, the last year property tax concessions were estimated, the national total came to $296 million.
In addition, Agriculture and Agri-Food Canada has never measured the benefits of preferential income tax treatments or subsidized power rates available to farmers.
Agriculture and Agri-Food Canada provides different sets of subsidy estimates to the OECD, for use in the OECD’s calculation of Producer Subsidy Estimates (PSEs) and Total Subsidy Estimates (TSEs). The OECD’s PSE and TSE estimates are used in trade negotiations, and have greater international acceptance than the figures provided by the Data Book. In 1998, the PSE estimate was $5.3 billion, and the TSE $7.2 billion, compared to $3.7 billion shown in the Data Book. PSE and TSE figures are not available by province. Were they available, the national subsidy would be almost twice as high as that shown by the Data Book. Because the difference between the two estimates derives largely from market price supports provided to the supply managed commodities, and in particular to milk, Quebec and Ontario would be shown by the PSE and TSE measures to be receiving the bulk of the additional subsidies. The PSE includes property tax concessions to farmers but not income tax concessions to farmers.
Agriculture and Agri-Food Canada’s data for its Data Book is reported on an April 1-March 31st fiscal period, its data for the OECD is reported on a “PSE-year” that attempts to accommodate the different characteristics of various programs, and Statistics Canada’s data, which draws upon income tax returns, tracks the calendar year. While some inconsistencies would negate others, the net effect understates the extent of subsidies that Canada’s agricultural sector – – and especially Quebec’s and Ontario’s agricultural sectors – receive.
When net payment to producer is greater than the total net income, adjusted total net income is negative. The farm subsidy ratio cannot be calculated using negative values and therefore a “*” is recorded in the table and is not included in the graphs.