Canadian farmers better off than U.S. producers

Farmers in Canada are better prepared than their U.S. counterparts to deal with an extended period of low commodity prices, says a major bank.

The BMO harvest outlook, predicting a period of soft commodity prices, notes significant differences in the ability to tolerate tough times among the two countries.

In the U.S., half a decade of low prices “has taken a serious toll on farmers, especially smaller high-cost operators.”

American farm revenues peaked in 2012, declining by 14 per cent since and will edge lower this year. Rising wage, fertilizer, fuel and interest costs put pressure on farm profits.

The report says a $12 billion federal aid package for farmers is not enough to offset costs and is aimed at soybean growers.

Farmland prices rose 300 per cent since 2000 but are moving sideways and could decline if farm income stays under pressure.

Canadian farmers, while receiving the same world prices, have been shielded from lower commodity prices by a drop in the Canadian dollar. U.S.-based pricing has dropped but Canadian farmers’ crop revenue has increased 16 per cent since 2012, simply because of a 23 per cent reduction in the loonie’s value.

Canadian farmers have an opportunity to capture markets overseas too.

Farmland prices in this country, while increasing briskly, could be vulnerable as interest rates move higher.

Ron Walter can be reached at ronjoy@sasktel.net