Urban Renaissance Institute

June 18, 2001

1991-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	4676	31123	37047	23523	676209	397205	104446	477051	152806	154093	2058180
Net payments to producers	2609	20881	9290	9761	562939	406850	139498	397373	312274	40471	1900946
Adjusted total net income	2067	10242	27757	13762	113270	-9645	-35052	79678	-159468	113622	157234
Government transfers	26709	54894	104758	74014	1240036	1386901	516089	1379998	1267306	274547	6327252
Farm subsidy ratio	12.92	5.36	3.77	5.38	10.95	*	*	17.32	*	2.42	40.24
				1992-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	6403	50254	35097	55487	543191	457186	269348	419412	464267	159422	2460065
Net payments to producers	4230	28042	14231	25668	565908	648361	272707	803645	745847	52243	3160882
Adjusted total net income	2173	22212	20866	29819	-22717	-191175	-3359	-384233	-281580	107179	-700817
Government transfers	32277	78510	105644	83046	1402705	1504251	797971	2211919	1550160	309149	8075632
Farm subsidy ratio	14.85	3.53	5.06	2.79	*	*	*	*	*	2.88	*
				1993-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	4180	8457	24682	31682	674556	576364	214095	961094	977184	156929	3629222
Net payments to producers	3437	9176	7855	12978	456338	429208	285079	598801	425309	30275	2258456
Adjusted total net income	743	-719	16827	18704	218218	147156	-70984	362293	551875	126654	1370766
Government transfers	34600	66063	108061	85032	1306059	1440049	621221	1561798	1292229	306440	6821552
Farm subsidy ratio	46.57	*	6.42	4.55	5.99	9.79	*	4.31	2.34	2.42	4.98
				1994-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	3283	55919	27867	26955	797619	476104	359235	799091	683871	132722	3362666
Net payments to producers	4614	11241	6577	3288	509475	171197	202286	149956	311124	21453	1391000
Adjusted total net income	-1331	44678	21290	23667	288144	304907	156949	649135	372747	111269	1971666
Government transfers	30907	61348	96076	72296	1215091	1210054	519590	1181150	1060514	296341	5743367
Farm subsidy ratio	*	1.37	4.51	3.05	4.22	3.97	3.31	1.82	2.85	2.66	2.91
				1995-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	2743	85926	29286	22201	652226	438453	173728	958571	1029356	104190	3496678
Net payments to producers	3063	24361	6217	7726	460771	191396	26361	118576	91144	20770	950385
Adjusted total net income	-320	61565	23069	14475	191455	247057	147367	839995	938212	83420	2546293
Government transfers	28552	45491	83833	63161	1146052	1052996	439069	1076454	830905	256064	5022579
Farm subsidy ratio	*	0.74	3.63	4.36	5.99	4.26	2.98	1.28	0.89	3.07	1.97
				1996-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	9200	25921	53625	37962	864149	608899	553468	1313144	914327	111794	4492488
Net Payments to Producers	6763	11242	12262	14392	356975	225991	-3838	237014	73689	28291	962781
Adjusted total net income	2437	14679	41363	23570	507174	382908	557306	1076130	840638	83503	3529707
Government transfers	25045	49535	72999	58295	1136922	902704	458740	1111794	744439	233238	4793711
Farm subsidy ratio	10.28	3.37	1.76	2.47	2.24	2.36	0.82	1.03	0.89	2.79	1.36
				1997-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	12799	9818	33213	7460	727318	484924	291736	184367	569737	146127	2467500
Net payments to producers	5997	7143	9135	9399	224388	216237	96733	162536	134448	31668	897683
Adjusted total net income	6802	2675	24078	-1939	502930	268687	195003	21831	435289	114459	1569817
Government transfers	23041	38020	63801	54094	882245	835519	326421	783512	780341	208505	3995503
Farm subsidy ratio	3.39	14.21	2.65	*	1.75	3.11	1.67	35.89	1.79	1.82	2.55
				1998-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	12756	18647	44101	12392	778216	482374	295240	543425	446706	228116	2861986
Net payments to producers	360	10467	15554	5222	526308	159882	46591	162910	150169	31651	1109114
Adjusted total net income	12396	8180	28547	7170	251908	322492	248649	380515	296537	196465	1752872
Government transfers	21951	34579	61251	49152	907033	842035	258526	438363	582511	221856	3417256
Farm subsidy ratio	1.77	4.23	2.15	6.86	3.60	2.61	1.04	1.15	1.96	1.13	1.95
				1999-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	19520	47291	44843	44947	799610	429047	227548	652009	402708	234111	2901635
Net payments to producers	350	18696	14528	5851	630008	330047	216017	475871	219080	40812	1951260
Adjusted total net income	19170	28595	30315	39096	169602	99000	11531	176138	183628	193299	950375
Government transfers	15835	34981	62125	40860	1012349	825217	230322	471669	579957	190444	3463760
Farm subsidy ratio	0.83	1.22	2.05	1.05	5.97	8.34	19.97	2.68	3.16	0.99	3.64
				2000-RATIO OF FARM SUBSIDIES TO FARM INCOME
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Total net income	10569	20627	46296	36754	810394	495174	453789	422149	408758	300743	3004212
Net payments to producers	364	15883	11256	5195	375978	391199	238307	623025	641060	36173	2338440
Adjusted total net income	10205	4744	35040	31559	434416	103975	215482	-200876	-232302	264570	665772
Government transfers	15086	41651	72257	44267	1079350	1057166	399144	722646	598317	202892	4232776
Farm subsidy ratio	1.48	8.78	2.06	1.40	2.48	10.17	1.85	*	*	0.77	6.36

* : indicates negative ratio
Adjusted total net income: Total net income – Net payments to producers

June 18, 2001

		FARM SUBSIDY RATIOS PROVINCIAL COMPARISON 1991-2000
	Nfld	PEI	NS	NB	QUE	ONT	MAN	SASK	ALTA	BC	CANADA
Adjusted total net income	54342	196851	269152	199883	2654400	1675362	1422892	3000606	2945576	1394440	13813685
Government transfers	254003	505072	830805	624217	11327842	11056892	4567093	10939303	9286679	2499476	51893388
Farm subsidy ratio	4.67	2.57	3.09	3.12	4.27	6.6	3.21	3.65	3.15	1.79	3.76
		FARM SUBSIDY RATIOS 1991- 2000: EASTERN CANADA
	Nfld	PEI	NS	NB	Total
Adjusted total net income	54342	196851	269152	199883	720228
Government transfer	254003	505072	830805	624217	2214097
Farm subsidy ratio	4.67	2.57	3.09	3.12	3.07
	FARM SUBSIDY RATIOS 1991-2000: CENTRAL CANADA
	QUE	ONT	Total
Adjusted total net income	2654400	1675362	4329762
Government transfer	11327842	11056892	22384734
Farm subsidy ratio	4.27	6.6	5.17
		FARM SUBSIDY RATIOS 1991-2000: WESTERN CANADA
	MAN	SASK	ALTA	BC	Total
Adjusted total net income	1422892	3000606	2945576	1394440	8763514
Government transfer	4567093	10939303	9286679	2499476	27292551
Farm subsidy ratio	3.21	3.65	3.15	1.79	3.11

Lawrence Solomon and Douglas Paisley

June 18, 2001

For every dollar that Canadian farmers earned over the last 10 years, federal and provincial governments supplied an average of $3.76 in agricultural subsidies. Ontario – at $6.60 in subsidies for every $1 in farm profit – is home to the most heavily subsidized farming operations in the country. No province operated a profitable farm economy for the past decade.

These findings follow Agricultural Subsidies in Canada 1990-1999, an Urban Renaissance Institute report published last year, which revealed that between 1990 and 1999, Canada’s governments provided an average of $3.55 in subsidies for every dollar earned by a Canadian farmer. This year’s data shows that the economic inefficiency of Canada’s farm sector has increased.

The level of subsidies that we report understates the direct and indirect financial assistance that Canadian farmers receive. Our findings are limited to subsidies that Statistics Canada and Agriculture and Agri-Food Canada reports for domestic consumption. Agriculture and Agri-Food Canada report a significantly higher level of subsidy for use by international bodies such as the World Trade Organization and the Organization for Economic Cooperation and Development, which require that the data conform to an internationally agreed upon format. The international format is used, for example, to help resolve trade disputes.

In addition, our study excludes the subsidy that farmers receive through property tax concessions, which Agriculture and Agri-Food Canada stopped reporting after 1996 due to variances in tax policy among provinces and a controversy over the appropriate method of determining the value of concessions. These unreported concessions are substantial. In October 2000, Agriculture and Agri-Food Canada released a report on agricultural property tax concessions that provided estimates of concessions for 1997 ranging from $70 million to nearly $1.1 billion, depending on the assumptions made.

In April 2001, the George Morris Centre responded to Agricultural Subsidies in Canada 1990-1999. Its report, To Tell the Truth on Farm Subsidies, stated:

There has been a lot of public discussion lately about farm incomes in Canada and the role of agricultural subsidies. Lawrence Solomon of the Urban Enterprise Institute [sic] has been at the forefront of   these discussions. His argument is that as a result of exorbitant subsidies, the government is sponsoring the industrialization of agriculture, which threatens the family farm at untold environmental costs.

The George Morris Centre’s report had two criticisms. First, it criticized the items that Agricultural Subsidies in Canada 1990-1999’s counted as subsidies, stating that:

The total government transfers data that the authors use as a measure of farm subsidies contains items that are not farm subsidies. A farm subsidy is a payment directed at farm income support; we    have some of these, and they are distortionary and support inefficiency. However, the Solomon-Zippin report includes (along with legitimate subsidies) regulatory transfers (from marketing systems that increase farm prices but involve no cash transfers from government to farmers), government expenditures that fund agricultural research, and food inspection/grading.

The George Morris Centre does not consider regulatory transfers, such as price supports provided by marketing boards, to be subsidies. This position is not credible. It is at odds with the understanding of most economists, and it is also at odds with the international organizations that define and measure subsidies, such as the OECD and WTO.

The George Morris Centre also criticized Urban Renaissance Institute for excluding government transfers from the income data (and, as a result, profit) that farmers report:

The authors take net farm income (aggregate farm profit) and deduct government payments to farmers to obtain farm income not received from government. Then, they take total government transfers and divide it by farm income not received from government to obtain the farm subsidy ratio. But what they calculate is government transfers as a percentage of income not received from government transfers, which is absurd. How can you have something as a percentage of what you don’t have?

Our study compared the subsidies provided to the farm sector with the profitability of the farm sector. We believe that profits are an important indicator of an industrial sector’s value, and that subsidies provided to that sector must be weighed against the sector’s actual profitability. The George Morris Centre’s approach would inflate the agricultural sector’s apparent profitability by counting some subsidies as profits. We see no merit in this approach.

Graph 1

For every dollar that a Canadian farmer earns federal and provincial governments provide $3.76 in subsidies. Since last year’s report on farm subsidies by the Urban Renaissance Institute, Ontario has surpassed Newfoundland as the most heavily subsidized province in Canada for the last 10 years. British Columbia and Prince Edward Island remain the least subsidized provinces with farm subsidy ratios of approximately two and three respectively.

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Graph 2

Central Canada has the highest farm subsidy ratio in Canada. Both Eastern and Western Canada are below the national average by between 15 and 20 percent.

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Graph 3

Low and sometimes non-existent adjusted total net incomes across Canada account for exceptionally high farm subsidy ratios in 1991. Where the adjusted total net income is negative, as in 1992, the farm subsidy ratio is incalculable. This is indicated by the bar running off the graph with an arrow.

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Graph 4

According to “Net farm income and farm cash receipts” released by Statistics Canada’s The Daily, farmers incurred declines in net cash income in Prince Edward Island of -53.6%, Newfoundland -32.8%, and New Brunswick -27.4% in 2000 and the first quarter of 2001, contributing to higher farm subsidy ratios in all of Eastern Canada. Over a 10-year period the eastern provinces continue to be Canada’s least subsidized region with gradually declining farm subsidy ratios.

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Graph 5

The central provinces are the most heavily subsidized region in Canada. The figures shown on the graph exclude property tax concessions. A recent Agriculture and Agri-Food Canada report on agricultural property tax programs for the year 1997 showed that Ontario and Quebec obtain almost 75 percent of property taxes rescinded across Canada.

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Graph 6

According to “Net farm income and farm cash receipts” released by Statistics Canada’s The Daily, program payments soared 44.8% to $2.8 billion in 2000. Most of this increase was paid out under the Alberta Farm Income Assistance Program, the Canada-Manitoba Adjustment Program and the Canada-Saskatchewan Adjustment Program: initiatives designed to help farmers adjust to the elimination of transportation subsidies at a time of low prices. In eight out of 10 years, British Columbia has remained below the national average farm subsidy ratio. The other western provinces show a similar consistency interrupted by soaring farm subsidy ratios due to low or negative adjusted net income figures.

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Graph 7

Newfoundland has the second highest farm subsidy ratio in Canada over the past 10 years largely due to a consistently low adjusted net income. From 1998 to the present, considerably lower net payments to producers have nearly doubled the province’s adjusted total net income from previous years.

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Graph 8

Prince Edward Island had Canada’s second highest farm subsidy ratio in 2000. Statistics Canada attributes the poor farm economy in 2000 to decreased incomes caused by lower potato prices. However for the last 10 years, Prince Edward Island has the country’s second lowest farm subsidy ratio.

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Graph 9

Nova Scotia has the eighth highest farm subsidy ratio. For the past ten years the farm subsidy ratio has remained steady while 10-year trends for the province show adjusted total net income to be gradually increasing and government transfers to be decreasing.

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Graph 10

New Brunswick has the seventh highest farm subsidy ratio. Like Nova Scotia, New Brunswick has maintained a steady farm subsidy ratio that is generally consistent with the national average. Also, like Nova Scotia, New Brunswick’s farm economy has seen an overall increase in adjusted total net income: from approximately $15,000 in 1991 and $32,000 in 2000; and a gradual decrease in government transfers: from about $75,000 in 1991 to about $45,000 in 2000.

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Graph 11

Quebec has Canada’s third highest subsidy ratio. Quebec has continued to stay well below its high farm subsidy ratios from the beginning of the decade dropping from 10.27 for 1991 to 2.48 for 2000.

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Graph 12

The highest farm subsidy ratio in Canada, 6.60, is Ontario’s. The year 2000 marks the end of a steady decline in government transfers, which have increased by 25% over the previous year. The adjusted total net income is a third of 1998’s, despite significant increases in net payments to producers. Note the increase in farm subsidy ratios for 1999 and 2000.

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Graph 13

Manitoba has Canada’s fifth highest farm subsidy ratio. In 2000, declining government transfers returned to their highest level since 1996. Also in 2000, the adjusted total net income has increased by nearly 50% over the previous year after more than halving in 1999. Manitoba’s farm economy is unprofitable over the 10-year period but achieved a marginal profit in 1996 with a farm subsidy ratio of .82.

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Graph 14

Saskatchewan has Canada’s fourth highest farm subsidy ratio. According to Statistics Canada, Saskatchewan received a large increase in government transfers: +63% in direct program payments over the previous year. This and declining incomes gave Saskatchewan the country’s lowest adjusted total net income for 2000: -$200,876

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Graph 15

Alberta has Canada’s sixth highest farm subsidy ratio. Statistics Canada reported that direct program payments in 2000 had tripled since the previous year. Since 1995, the adjusted net income for Alberta has dropped by 150%, to -$232,302. This is the second lowest adjusted total net income for 2000. In spite of having a 10-year farm subsidy ratio that makes Alberta’s farm economy a tax burden it was marginally profitable in 1995 and 1996.

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Graph 16

British Columbia has Canada’s lowest farm subsidy ratio: less than half the national average. While its 10-year ratio shows it to be an unprofitable farm economy, British Columbia’s farms operated with a marginal profit in 1999 and 2000 with ratios of .99 and .77 respectively.

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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, 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 and Ontario’s agricultural sectors – receive. Data for government transfers, net payments to producers and total net income is periodically updated by Agriculture and Agri-Food Canada and Statistics Canada. Adjusted transfer, payment and income statistics for 1999 and 1998, released since last year’s Agricultural Subsidies in Canada 1990-1999, are used for this report. Calculations: Adjusted total income = total net income-net payments to producers Farm subsidy ratio = government transfer/adjusted total net income 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 represented by a bar running off the margin on the graph. References: 1. Statistics Canada, Agricultural Economics Statistics, Catalogue 21-603UPE, May 2001 2. Farm Income, Financial Conditions and Government Assistance – Data Book, Table D, March 2001 3. Agricultural property tax concessions and Government Transfers to Agriculture – Executive Summary, Table B, December 2000