Predictions that Canadian farm income will set a new record high in 2010 are wrong, according to Darrin Qualman, a former researcher with the National Farmers Union (NFU).
“These income levels are in no way a record,” Qualman said in an interview last week in response to a report prepared by Agriculture and Agri-Food Canada and Statistics Canada that estimates 2010 net farm cash income of $8.9 billion and average net operating income per farm at $50,077.
If the forecast is correct, net farm income last year will have slightly exceeded the previous record set in 2008.
For starters Qualman says the most accurate measure to assess farm income is realized net income, which includes depreciation. That’s projected to be almost $3.5 billion in 2010.
But then, according to Qualman, net farm incomes should be compared in constant dollars (adjusted for inflation), without including government subsidies. Then it’s clear what farmers earned from the market.
In 2010 Canadian net farm subsidies (after deducting farmers’ premiums) are estimated to be $2.3 billion, leaving farmers with just $1.2 billion in net income from the market.
Manitoba net farm income in constant dollars, without subsidies, in 2010 is around $10,000 per farm – similar to what it was in the early 1940s and well below the $20,000 to $30,000 Manitoba farmers netted between the mid-1940s and 1980.
University of Mani toba agricultural economist Derek Brewin agrees comparing per-farm income in constant dollars has merit. But he disagrees with leaving out subsidies. According to Brewin farmers are acting rationally.
“My point is if the subsidies were to disappear I think farmers would be paid to produce,” he said, adding that over time farmers’ incomes would be much the same even without subsidies.
“We have lots of other options in Canada. Why would we (farmers) sit there and produce at a loss?”
If the markets didn’t adequately pay farmers, then costs, especially for land, would decline, leading to lower production costs, Brewin said.
Net farm incomes, without including subsidies, have been relatively low in recent years, but Brewin says net income is misleading.
“I still distrust net income because it’s not in the farmer’s best interest to show high income to the taxman,” he said.
Many farm expenditures, which reduce net income, are investments that make a farm more productive and profitable over time.
Qualman agrees farmers try to reduce their taxable income, but has always been the case. So it doesn’t explain why average net farmers’ incomes were much higher between the mid- 1940s and early 1980s than they are now.
“We’re not saying there is no net income made, we’re saying there is no net income from the market,” Qualman said. “What counts as net income is virtually all from program payments.
“You have a year like 2010 that the minister (of agriculture Gerry Ritz) calls a bumper year yet his figures show that taxpayers transferred almost $3 billion to agriculture.”
The report estimates total farm cash receipts for 2010 at $43.37 billion. That’s how much money farmers generated from what they produced and sold.
“Farmers have doubled and redoubled output and net income has gone down,” he said. “It’s probably just a bad model we’ve pursued.”
Canadian farmers have created about $1 trillion of wealth the last 30 years, but farmers themselves have retained almost none.
“The whole trillion bucks was captured by the agribusiness companies,” Qualman said. “So the wealth creation is incredible, but the wealth extraction is really jaw dropping.
“People using less advanced inputs and fewer inputs are making net incomes because if they weren’t… they would’ve starved to death or been bankrupted – people in Asia or Africa.”
Brewin disagrees. Canadian farmers do earn a net gain from many of the inputs they buy.
“For example, the increase in seed prices for canola did lead to great big yield increases,” he said.
“I think the profits are there (for Canadian farmers) and they’d (African farmers) switch places with Canadian farmers in a heartbeat.”
The fact that Canadian land prices continue to increase is a sign farmers are making money, Brewin said.
The report estimates the average Canadian farm’s net worth is $1.6 million.
The aggregate net worth of Canadian farmers, when adjusted for inflation, has just come up to where it was 30 years ago, after the farm debt crisis that saw lands values plunge and thousands of farmers leave the land.
But since there are fewer farmers, their average “real” net worth is probably much higher, Brewin said.
Qualman argues high-value farms mainly benefit exiting farmers and add costs to new or expanding farmers.
“What does it mean? It means in order to have that middle-class lifestyle (as a farmer) you need $1.6 million (or more in farm assets),” he said. [email protected]
“We’renotsayingthereisnonetincome made,we’resayingthereisnonetincome fromthemarket.Whatcountsasnetincome isvirtuallyallfromprogrampayments.”
– DARRIN QUALMAN