Media Clipping — September 2008, Nova Scotia Federation of Agriculture Newsletter

GPI Report: It’s what we have been saying…

In August, GPI Atlantic released a report on Farm Economic Viability in Nova Scotia and PEI that examines trends since 1971 in several key indicators of farm economic viability in the two provinces, including:

• Net farm income
• Expense to income ratio
• Farm debt
• Total debt to net farm income ratio
• Solvency ratio (total liabilities or debt divided by total assets or capital value of farms)
• Return on investment

The report also presents the total economic contribution of agriculture to the provincial economies of Nova Scotia and PEI (including direct, indirect, and induced impacts) and to job creation in the two provinces, and it contains specific policy recommendations to improve farm economic viability in the Maritimes.

A full copy of the report is available on line at here, but the following are key findings of the report.

Statement from Report

“…all key indicators of farm economic viability in Nova Scotia and Prince Edward Island are trending sharply downward.”

The key indicators include:

Declining net farm income, dropped by an average of 91% between 1971 and 2007 (since 2001 the average net farm income is $2,635. Net farm income in 02,03,06, 07 was negative.)

Debt to net farm income ratio farm debt divided by total net income a healthy ratio is 600%. In Nova Scotia the ratio in 2005 was 5277%.

Federation Response

We have recognized these trends and have spent considerable time trying to convince government that they are real and could have considerable negative consequences, not only for farmers, but for all Nova Scotians if allowed to continue. With so many clear indicators that the industry is in decline it should be obvious – even to those who are uninformed and naïve about how our industry functions - that changes in public policy are required to transition our industry to one which can survive in post modern global markets. The government is either among those that don’t understand how the industry works and how it impacts upon the greater community or they are just not listening.

Statement from Report

“The 2001 GPI reported warned explicitly that:”

“All five indicators of farm economic viability…in the Nova Scotia farm sector show that farm viability in Nova Scotia is being seriously eroded, and independence is being undermined. These disturbing trends are occurring even while farm cash receipts are growing, and while standard economic growth measures fail to signal problems. Yet, if current trends continue unabated, the future of Nova Scotia agriculture is clearly at risk….

“Nova Scotia farmers are spending more to produce food and getting less for their products. They are going deeper into debt and having more trouble making payments on their debt. In many cases farmers are no longer breaking even, are working other jobs to keep their farms, and may be forced to sell their land. Put simply, many Nova Scotia farmers can no longer afford to farm…. If current trends continue…major parts of the province’s agriculture sector will disappear.”

Federation Response

We would hope that the government listens to GPI’s latest warning and takes it seriously. The industry was clearly at risk in 2001 and conditions have deteriorated significantly since then as GPI’s update indicates. The 2001 prediction that parts of the industry will disappear have become reality – the pork industry, the pea and bean industry are prominent examples; the cattle industry is headed the same way. As we lose producers we lose infrastructure both up stream and down stream that complicates things for remaining producers and the spiral continues.

We would hope that, instead of going on the defensive, that the government will take this report seriously and start to seriously work with the farm community toward a new approach agricultural policy.

The fact is that we do not have any agricultural policy in Nova Scotia. What we do have is a series of programs that change from time to time often without any justification beyond what is available in terms of funding from Ottawa. With respect to the dominance of federal policy, the Federation continually points out that what is good on a national basis may not necessarily be good for Nova Scotia.

The industry has taken a comprehensive approach to planning for change. The farm community has recognized for the past decade that it needs to become more flexible and change, we must develop products that consumers want and that cannot be produced elsewhere for less money. The problem has become that farms are no longer profitable enough to provide the resources required to make the necessary change. In many cases change is beyond the capability of individual producers and the industry collectively. The problem has been magnified considerably by increases in the cost of energy.

Increasing energy costs have emerged as the key change agent for agriculture, our production and distribution systems have traditionally been based on cheap fossil fuel That fact has changed and will continue to change in the future. That fact may also change Nova Scotians access to the variety, quanity and quality food they have been used to unless it can be produced closer to home.

Statement from Report

“The adverse trends in these four indicators, signifying a clear and ongoing decline in the economic viability of farming in Nova Scotia, have inevitably produced a second key research question: If farm viability indicators have been in continuous decline for over 25 years, why do Nova Scotia farmers continue to farm? This question cannot be satisfactorily answered in terms of simple economics, since the current economics of farming simply do not support continued farming by most Nova Scotia farmers.”

Federation Response

When up to half of the farm businesses in the province cannot or have great difficulty in meeting the cost of production the question put forth in the report “… why do farmers continue to farm” is very relevant. As the report indicates the answer can’t be found in simple economics.

To a great extent farm families are locked into a behavioural pattern. In most cases if doing a job doesn’t make sense one would sell off the assets and move to something else. That is not so easy for a farmer. First, because farming has become unprofitable the assets have little value or there is no market for them. Second, in many cases the assets are so beat up because of lack of capital they have little value anyway. Third, directly connected to the job of farming is the home – lose the farm lose your home; and that is just one of the social and cultural barriers involved with shutting down a farm business. Forth, there is no system of social safety nets for farm families to fall back on. Often the only option is to struggle on and hope for better times, or some program that will enable one more year.

Statement from Report

“Unfortunately, the adverse trends reported in the 2001 GPI farm viability report did not spur sufficient public, government, and corporate action to reverse those trends and enhance the economic viability of farming in Nova Scotia. Instead, those adverse trends have been allowed to continue to the point where recovery is no longer an option for many farmers, who are forced either to abandon farming or to sell off portions of their farms “

Federation Response

This is an emerging issue related to the position in which many farmers find themselves - the growing debate over agricultural land-use and converting agriculture land to non renewable uses. Land, in many cases, is the only capital asset farmers have that is liquid.

Neither GPI’s 2001 report nor the Federation’s efforts through planning and advocating a new approach to agricultural policy have stimulated public action – industry decline continues at an accelerated pace due to increasing input costs. The farm community has not asked government to spend more money on agriculture. The combined federal/provincial expenditure on agriculture in Nova Scotia is approaching $90 million a year. That is a significant investment and it is not making an overall difference to the industry’s efforts to transition its self to current market realities. What farmers have asked is that government be more strategic in it investment – spend what they are spending in a more efficient and effective manner.

Eight years ago farm leaders in Nova Scotia recognized that change was needed, they also recognized that change has to begin somewhere – with a planning process - and that it doesn’t just happen, people, stakeholders have to make it happen. For eight years farmers have engaged industry stakeholders in what can only be described as a comprehensive approach to the future.

At this point it is beginning to appear that government has viewed farmer’s efforts to attempt to manage the industry’s problems and their future as a useful diversion, providing cover for the kind of superficial support that has been provided – support that will always result in disillusionment as the expectations of those in need are raised and then not met.

In The Hollow Men , T.S. Eliot wrote that the world will end “not with a bang but with a wimper”. Eliot’s perception might well describe the way farmers feel about the future of their industry in Nova Scotia. Agriculture in Nova Scotia will end, not with a sudden bang, but come to a slow grinding to a halt as the system just stops working.

Copyright © 2008, Nova Scotia Federation of Agriculture