Saddling Farmers With Debt

Minister Wowchuk's recent press announcement that the province will increase the agricultural Operating Credit Guarantee from $15 million to $25 million is a tacit recognition of the Government's current agricultural strategy to propagate the current process of farm amalgamation by enabling agricultural producers to string an even heavier yoke of debt around their necks.
[http://news.gov.mb.ca/news/index.html?archive=&item=3819]

The Manitoba Government boasts that it has increased the the Operating Credit Guarantee administered by the Manitoba Agricultural Services Corporation [MASC] by 10 million dollars to a total maximum of 25 million. MASC's own website states that the purpose of this program is to “...provide a 25 per cent guarantee on operating lines of credit with participating private lending institutions.” Essentially this funding increase allows “participating private lending institutions” to annually saddle an additional 40 million dollars in debt on the backs of Manitoba's agricultural producers. However will an increase in debt-load really benefit agricultural producers? Or will it be more beneficial to the institutions that earn interest on the money loaned? In the past twenty years the total debt outstanding by Manitoba farms has more than tripled from $1.85 billion in 1988 to $6.07 billion in 2007. Yet over the same period the realized net farm incomes of Canadian farmers have declined from $3.9 billion in 1988 to $1.5 billion in 2007.
[http://www.statcan.ca/english/freepub/21-014-XIE/21-014-XIE2008001.pdf]
[http://www.nfu.ca/briefs/2007/1988%20vs%202007%20FINAL%20bri.pdf]

In theory this increase in funding guarantees should allow Manitoba's agricultural producer to access $5,248.24 (up from $3148.94) in operating loans on an annual basis, but these loans will not be allocated equally among all producers. The vast majority of Canadian agricultural producers, 65.6%, to be exact, earn gross annual receipts of less than $100,000; however these farms are the least likely to be profitable. As a case in point farms earning annual gross receipts of less than $25,000 turn a profit 29% of the time; whereas 86% of farms with annual gross receipts over $1 million earn a profit. [http://www.statcan.ca/english/agcensus2006/articles/finpic.htm]

Lending institutions are in the business of risk management, and the statistical reality is that the vast majority of Canadian farms, the small family-run operations, are less likely to be profitable than their multimillion dollar counterparts. Lending institutions therefore are more likely to loan money to the more profitable larger farms.

At the end of the day it seems likely that the increase in the Operating Credit Guarantee will aid in: helping to prop up large-scale hog/poultry operations, and helping large and medium sized farmers to buy-out their smaller neighbors.