The News & What it Means – Soaring Unemployment: Canadian Farms at Risk?

By John DePutter & Dave Milne – May 12, 2020
The News:

“US farm bankruptcies are continuing to tick higher and the toll may rise even further as off-farm jobs are lost in the wake of the COVID-19 pandemic, according to the American Farm Bureau (AFB).”

Syngenta website article, May 8, 2020
What it means:

The same scenario is likely to play out on this side of the border.

It is no secret that plenty of Canadian farmers depend on off-farm income or spousal income to make ends meet. In fact, according to Statistics Canada, off-farm income increased 3.7%, to nearly $100,000 on average per family. That’s almost 60% of the total income of farm families in 2017 – the most recent year for which statistics are available. That’s a hefty amount and it’s grown steadily over the years.

It is also interesting to note that, in 2017, as off-farm income increased, average net farm operating income went the other way, declining 2.6%. In essence, off-farm jobs were cushioning the losses of farming operations.

All Canadian farm types rely on off-farm income, which is shrinking

Both pension and investment income are counted as off-farm income, but most of that money – typically about two-thirds – comes from jobs that are held off the farm. So, it is easy to see just how important off-farm employment is in terms of allowing the actual farming operation to stay afloat.

This is particularly true when one considers the fact that nationwide farm debt has also been steadily increasing. It reached a record $106.1 billion at the end of 2018.

As the chart below shows, Canadian farms of all types (and particularly those in the cattle business) rely on off-farm income for a large percentage of total family revenue.

The bottom line is that any business – not just a farm – is going to have trouble paying the bills if it loses what amounts to about 60% of its total income.

Canadian unemployment soars

Meanwhile, as in the US, the COVID-19 pandemic has resulted in widespread and massive job losses here in Canada. Last week it was reported the Canadian economy lost almost 2 million jobs in April, as the unemployment rate soared to 13% from 7.8% in March. Millions more workers have had their hours and incomes sharply reduced. It stands to reason that some of those impacted have been producers working off the farm.

Farm Credit Canada has unveiled programs which allow producers to defer loan payments and Ottawa has unveiled a $252-million aid package that farm groups have universally panned as being inadequate. For those operations that have lost their off-farm income, the revenue squeeze caused by the pandemic will be even more painful.

The virus death rate is slowing in Canada, so let’s hope more people are able to safely get back to work soon. Some Canadian farms will depend on it.

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