COUNTING YOUR CHICKENS
This year’s crop yield may be disappointing, but overall the farming sector is in good shape
>>> This fall proved to be a bit of a heartbreaker for many in Alberta’s agricultural sector, as what looked to be a great season turned sour when a wet fall and some early snowstorms flattened crops and buried canola fields.
But, according to a recent report from Farm Credit Canada, the overall news for Canada’s agricultural sector – and for Alberta’s, which was about average on most of the indicators – is good. The FCC found that Canada’s farms are in a strong position to meet their financial obligations, as asset values climb while debt remains at manageable levels. “At the national level – and Alberta is right in the mix – we’re in very good shape,” says J.P. Gervais, vicepresident and chief agricultural economist with the FCC. “There are some headwinds coming in, and we need to be aware of this, but they’re not that strong at the moment.”
Gervais points to the ratio of assets (cash, accounts receivable and inventory) to liabilities (debts and accounts payable) for evidence. Nationally, it stands at 2.38 per cent. In Alberta, it’s 2.58 per cent, second only to Saskatchewan’s 3.5 per cent. “A high asset to debt ratio is not necessarily a wealth indicator, but it’s more of a sign of flexibility in the business,” Gervais says. “If there’s an opportunity to expand, they have the ability to stretch themselves out a bit more.”
In terms of headwinds, Gervais points to the low prices being paid for cattle, a result of an overbuild of North American herds in recent years. “We’re going to have to see prices come down at the retail level to see things improve,” he says. “They’ve already started, to some extent. It’s the timeline I’m not certain of.”