PRESS RELEASE April 24, 2001, Halifax, Nova Scotia

NS Farmers Can’t Afford to Farm

Low Farmgate Food Prices Threaten Farm Viability
Since 1971:

• Farm Net Income Declines by 46%
• Debt to Income Ratio Triples from 300% to more than 900%
• Farm Debt Exceeds Farm Receipts for First Time
• Debt per Farm more than Doubles
• Expense to Income Ratio Up from 83% to more than 90%
• Return on Investment Down
• Dependency on Government more than Doubles

It’s always been hard to make a living farming, but in the last few years it's become much harder. 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.

The troubling results, never before compiled and publicly presented, are part of a 71-page report on Farm Viability in Nova Scotia produced by GPI Atlantic, a non-profit research group that is constructing an index of sustainable development for Nova Scotia. If current trends continue, the report warns, major parts of the province's agriculture industry will disappear.

From 1971 to 1999, the ratio of total farm debt to net farm income in Nova Scotia tripled, jumping from 300% in the early 1970s to more than 900% today. For the first time in recorded history, total farm debt in the province actually exceeds total farm cash receipts. It is increasingly difficult for farmers to make payments on debt.

Net farm income has declined by 46% since 1971, despite an increase in farm output and total farm cash receipts, the conventional measures of farm economic health. That's because farmers are paying nearly 40% more in real terms for farm inputs like feed, labour and fertilizer, while prices paid for farm products have hardly changed. As a result, farmers' expense to income ratio rose from an average of 83% in the 1970s to more than 90% in the 1990s. Hog farmers reported expense ratios of more than 95%, and apple and beef farmers were actually losing money.

“Outdated accounting systems like the Gross Domestic Product (GDP) and economic growth measures are misleading and send the wrong messages about farm health because they ignore costs and count all spending as economic gain,” says Ronald Colman, director of GPI Atlantic. “What's the use of producing more, if farmers can't make a living doing it? The Genuine Progress Index can more accurately assess our true economic state because it includes costs and counts net benefits rather than gross income and spending.”

Low farmgate food prices have made farmers more dependent on government payments for survival at the very time that subsidies are declining. Since 1971, total net farm income before government payments declined by nearly 60% from an average of about $60 million to $25 million in constant 1997 dollars. Direct payments to farmers also declined 35% from $17 million in the early 1980s to $11 million in the late 1990s.

Because farm market income has declined faster than the cuts in government payments, the dependency ratio (direct government payments as a proportion of total net farm income) has more than doubled in the last 28 years. This has made farmers more vulnerable and undermined their independence, says the GPI report.

“Every major indicator of farm viability is in decline,” says report author Jennifer Scott. “One way to keep a viable agriculture industry in Nova Scotia is to pay farmers more for the food they produce.”

Scott found some exceptions to the downward trend. “Supply-managed industries like dairy and poultry that can control prices have more income security and a higher return on investment. Organic farmers who market their goods directly to consumers can also get a better price for their products. Some farmers are also looking for ways to cooperate so they can gain market stability.”

“When returns on investment drop below other investment opportunities like pension funds and mutual funds,” says Scott, “there is no incentive to invest in unprofitable farming operations.” As pension funds brought in an average 10.2% return on investment between 1995 and 1999, Scott estimates that a return of less than 5% will discourage farming investments and make them uncompetitive.

“Adequate returns are particularly important in farming because of high risks due to unpredictable fluctuations in weather, pest incidence, crop and livestock diseases, trade patterns and prices. Only dairy and poultry currently show an adequate return in Nova Scotia.”

Scott notes that farm economic viability is the “bottom line” for all other indicators of farm health. “If farmers don't get an adequate return on investment, they can’t devote resources to producing high quality food and investing in soil quality,” says Scott. “They are forced to cut corners on safety and land stewardship. Sadly, farming is no longer economically viable in many sectors of the industry, and farming communities are suffering.”

GPI Atlantic recommends that indicators of farm economic viability be tracked annually as indicators of “genuine progress” for Nova Scotia agriculture. “Now that we have these results for the first time, we can't ignore reality any more,” says Colman. “We need to assess whether we are making progress turning these trends around to keep agriculture alive in Nova Scotia and to ensure food security for future generations.”

The report is the first section of the GPI Soils and Agriculture Accounts. Funding assistance for this report was provided by the National Round Table on the Environment and the Economy, the Nova Scotia Voluntary Planning Agency and GPI Atlantic members. Future reports by GPI researchers Jennifer Scott and Julia Cooper, to be released in the coming months, include assessments of soil quality, pesticide use, nutrient use, livestock yield, biodiversity, employment, community resilience, and trade in farm products.

This is also the first data release in the Kings County Genuine Progress Index, where GPI Atlantic is working with the community to construct an index of wellbeing at the county level. The GPI research for this report included in-depth interviews with Kings County farmers. The Kings County portion of the research was funded by the Rural Secretariat. The full GPI Kings wellbeing survey is to be administered in the coming weeks.