Better Farming - November 2016

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56 FarmNews First > Better Farming November 2016
THEHILL
political debate. This lack of discus-
sion is certainly the case in Ontario.
With many sectors coming off several
years of good commodity prices and
income, debt servicing hasn’t been
seen as a major issue. Besides, some
might say farm asset levels are rising
so what’s the problem?
Well, according to the influential
Calgary-based Canada West Founda-
tion (CWF), a privately-funded
policy think tank that examines
economic issues affecting Western
Canada, there are potentially several
problems.
With a generational change and
consolidation underway on many
farms, more debt financing is inevita-
ble to pay for buyouts and transition,
even as some retiring farmers pay
down debt.
And to assume that the current
run of rock-bottom interest rates will
continue indefinitely may not be the
best farm financial business plan.
This summer, CWF published a
discussion paper and launched a
consultation with Prairie farmers on
the debt issue.
Sarah Pittman, a Foundation
intern involved in the project, says
western farmer feedback has been
varied with no consensus about the
severity of the debt overhang or what
could be done about it, but “it does
seem to be a significant concern to
many of our respondents.”
She also raised some not-too-dis-
tant history to illustrate that changing
conditions can transform a manage-
able issue into a crisis.
In 1980, a Canadian farm popula-
tion more than double the current
level was carrying a debt of approxi-
mately $23 billion, interest rates were
stable and debt servicing manageable.
Lending institutions reported a low
level of defaults.
In little less than a year, the
economy stagnated, interest rates
soared into double digits and tens of
thousands of farmers across the coun-
YinYang/E+/Getty Images photo
With a generational change and consolidation underway on
many farms, more debt financing is inevitable.