Farm income in Nova Scotia and PEI hits rock bottom

Farmers in Nova Scotia and Prince Edward Island are now earning less than at any time in the last four decades—so little in fact that rural communities in both provinces are at serious risk. That’s the conclusion of a new report on farm economic viability released today by GPI Atlantic, the Nova Scotia based non-profit research group that is constructing new measures of progress for the province.

Every key indicator of farm economic viability in Nova Scotia and PEI is in sharp decline:

• Net farm income has dropped by an average of 91% in Nova Scotia and by 92% in PEI since 1971, and in 2007 reached the lowest levels ever recorded in both provinces. Nova Scotia farms have recorded negative net farm income (where income no longer covers expenses) in four of the last six years, as have PEI farms in five of the last seven years.
• In Nova Scotia, the expense to income ratio increased from an average of 82% in the 1970s to an average of 97% in the last decade, and in PEI it rose from an average of 74% to 98% during the same 35-year period—in recent years far exceeding the 80% threshold estimated as needed for a healthy farm sector. In 2006 the expense to income ratio reached 100% for Nova Scotia farms and 102% for PEI farms. This indicates that the prices paid to producers for their products are inadequate relative to rising input costs, and are not keeping pace with farm expenses.
• Total farm debt increased by 146% in Nova Scotia, and by 445% in PEI, between 1971 and 2006. It is estimated that, in a healthy farm sector, the total debt to net farm income ratio should not exceed 600%—a level achieved in the 1970s and part of the 1980s —in order for farmers to service their debt. That ratio reached an astonishing 4700% in PEI in 2006_nearly 8 times the recommended 600% threshold.
• The solvency ratio (total liabilities or debt divided by total assets or the capital value of farms) increased by 106% in Nova Scotia and by 143% in PEI since 1971, indicating that Nova Scotia and PEI farms are becoming much less sustainable, with the rate of farm debt increase rapidly outstripping any appreciation in the capital value of farms.

Report author Jennifer Scott was shocked by the results: “No society should allow its farmers—the economic and social foundation of many rural communities—to experience such severe economic hardship. When we examined this issue for Nova Scotia farms in 2001, we reported the situation was bad. Now, seven years later, it is worse—much worse.”

Scott notes that the significant economic benefits generated by farms both for their rural communities and for the provincial economy—$460 million in business spending in Nova Scotia and $390 million in PEI—will be seriously endangered as farms fail. And jobs will be lost. Annual farm expenditures in Nova Scotia currently generate 6,600 full-time equivalent jobs in agriculture, and nearly 3,700 additional indirect and induced jobs.

A key cause of declining farm viability is depressed farm product prices. In Nova Scotia, farm input and grocery food prices have gone up much faster than farm product prices, so it is costing farmers considerably more to farm without a commensurate gain in income. Yet, remarkably, depressed farm product prices are not reflected in cheaper food prices for consumers, indicating that profits are being made in other parts of the food supply chain rather than at the farm gate.

Reasons for depressed farm product prices include global commodity pricing and trade issues, consumer demand for the cheapest price for food regardless of its origin or actual cost of production, and continued consolidation among retailers and processors.

Extensive GPIAtlantic interviews with Nova Scotia and PEI farmers produced a number of recommendations to improve farm economic viability, including:

1. Market diversification to increase buyer competition (and therefore prices) for food products.
2. Regulation to prevent excessive mergers of companies in the food system.
3. Greater supply management to ensure that food prices not fall below a reasonable cost of production.
4. Stimulation of increased demand for local products, for example through local procurement policies by businesses, retail stores, universities, schools, hospitals, and government agencies. This solution may be aided by escalating gas prices, as transportation becomes more expensive and local food thus more competitive.
5. Payments to farmers for provision of environmental goods and services (e.g. conserving wetlands and protecting freshwater quality)

Scott is encouraged by a new openness to shifting away from reliance on food imports towards the development of a healthy local food system. This, she says, will require the collaboration of all economic, government, and social sectors, including the media and a public more discerning and determined to buy and eat local food and to support Maritime farmers.

The full GPI Farm Economic Viability report for Nova Scotia and PEI released today can be accessed at: www.gpiatlantic.org/pdf/agriculture/farmviability08.pdf. A companion GPI report on Social Capital in Nova Scotia and PEI agriculture will be released in September.

For interviews or questions on this report, please call Jennifer Scott, at: 902-757-1640 or jen@ns.sympatico.ca. GPI Atlantic Executive Director, Ronald Colman, can be reached at 902-489-7007 or colman@gpiatlantic.org. Nova Scotia Federation of Agriculture Executive Director Laurence Nason can be reached at 902-893-2293 or lnason@nsfa-fane.ca.

Funding towards this study was kindly provided by the Nova Scotia Department of Agriculture and Fisheries, Prince Edward Island Department of Agriculture, Organic Agriculture Centre of Canada, the Rural Secretariat / Canadian Rural Partnership, and GPI Atlantic members.