Richard Bianchi was lucky enough to get a decent crop off this year, but the southern Alberta grain grower isn't feeling so lucky anymore.
The settlement cheque he received for two B-train loads of malt barley, valued at a little more than $10,000 for just shy of 90 tonnes, is made out in the amount of $0.00.
"Never in my farming history have I received a zero balance cheque," says Bianchi, 56, who farms three sections 40 kilometres east of Coutts on land he took over from his father.
Like many farmers facing acute cash-flow issues this year, Bianchi's predicament comes as the result of shouldering soaring input and freight costs, as commodity prices, which are globally set, sink so low there's simply no return anymore.
The cash-flow crisis is hitting many Western Canadian farmers especially hard, as it comes on the heels of nearly five years of equity-eating disasters in agriculture brought on by adverse weather, drought, and BSE.
Bianchi says the present financial crisis outweighs the cash-crunch he weathered in 2001, when drought and grasshoppers decimated his crops.
"I think the crisis in the grains end of agriculture right now is going to far outreach what happened in the cattle industry with BSE," Bianchi says.
According to Agriculture Canada, between January and September 2005, farmers received a record $4 billion in program payments, an increase of 17.8 per cent over the same period a year ago.
Most of these payments were delivered through the Canadian Agricultural Income Stabilization program (CAIS), which was created to help producers protect their farming operations from drops in income, and the Farm Income Payment program, which provides immediate federal assistance.
Bob Friesen, President of the Canadian Federation of Agriculture, says farmers would prefer to get their money from the marketplace.
"Unfortunately, they can't," he says.
"Our farmers are coming out of the worst three years of farm income in 100 years, and they continue to compete against American farmers that are coming out of the best three years in a decade."
Deductions made to Bianchi's cheque of $10,118 -- or $114 a tonne -- issued by a malting company for the two loads of malt barley include costs for freight ($2,310), elevation ($2,175), cleaning ($444), inspection and weight ($47), and the Alberta Barley Commission voluntary check off of 50 cents per metric tonne ($45).
There's also a deduction of $5,097 for a refund to the Canadian Wheat Board for a $27,000 cash advance Bianchi says he had no choice but to draw on, this year and last.
He used the interest-free advance from the board to pay down the balance owing on a $65,000 operating loan at the bank and save on interest rates.
It's a common strategy this year, as many grain and oilseed producers in Western Canada are experiencing all-time record cash flow problems, says Rod Scarlett, executive director of the Wild Rose Agricultural Producers.
"A lot of people are dealing with cash-flow issues and are using Canadian Wheat Board advances, CAIS advances, whatever they can to mitigate their risk as it pertains to bad debt," Scarlett says.
Mike Leslie, manager of the Alberta Barley Commission, says the situation is sad but true.
He notes Bianchi is lucky he didn't get a bill from the malting company, however, given the cash advance.
"If he was taking an advance and was from northern Saskatchewan and northern Alberta, he would probably get a bill for the services," Leslie says.
Brian Saunderson, a regional farm business representative for the Canadian Wheat Board, says Bianchi will have received another $22 per tonne price adjustment for his malt barley this month and has about another $31 per tonne coming his way, as $114 a tonne was the board's initial price.
Commodity prices are low, but Saunderson says farmers can squeeze more cash out of their operations through various other programs offered by the board.
Using a different program may have made a difference in this case, he says.
"With the cash advance deduction and freight and everything else, it (cheque) just ends up with zero," Saunderson says.
George Henline, a mixed farmer south of Foremost and councillor for the County of Forty Mile, says commodity prices are as low now as they've ever been, once inflation is factored in.
Farmers don't know which way to turn, he says.
"BSE was, you open the border, you look at other markets, but we don't even have that option available to us."
Like any farmer stuck between a rock and a hard place, Bianchi later returned the zero-balance cheque to the malting company and requested that it be reissued to him on a deferred ticket, a measure used for tax planning purposes. In this case, the income will be reportable in the 2006.
Between the deferred ticket and the adjustment payments, Bianchi says he should have $107 per tonne in his pocket.
Bianchi is frustrated with the situation in the grains sector, but he's not sure what can be done about it.
He's not convinced the recent round of talks at the World Trade Organization ministerial conference in Hong Kong will result in a meaningful bump in commodity prices anytime soon (See story, Page C4).
According to the Canadian Agri-Food Trade Alliance (CAFTA), trade barriers cost Canadian grains and oilseeds producers an average of $54 a tonne, when all the distortions caused by export subsidies, domestic support programs that are trade-distorting, and tariffs due to market access barriers are tallied up.
Meanwhile, farmers have no control over what price they'll receive for their crops or what they'll have to pay for services or inputs.
The CAIS program, which Bianchi has twice tapped, is too convoluted to offer immediate relief, he says.
"We're a patient kind of business and we wait for things to improve and we kind of rely on certain programs to keep us afloat, and it just doesn't seem to get any better," he says.
Bianchi isn't alone in his frustration.
Producers cited these factors as drivers in the farm income crisis in cross-Canada consultations held earlier this year by Wayne Easter, parliamentary secretary to federal Agriculture Minister Andy Mitchell.
Developing long-term strategies to get more money out of the marketplace and move farmers to profitability is at the heart of the discussions of the Canadian delegation attending the WTO talks in Hong Kong.
Canada's delegation, led by federal International Trade Minister Jim Peterson, and including Alberta Agriculture Minister Doug Horner and others, has spent the past six days working alongside delegates from the 149-member WTO attempting to draft an outline for a final agreement on reducing trade barriers in agriculture, manufacturing and services.
Riding gunshot on the Canadian delegation on behalf of farmers has been Randy Hoback, chairman of the Western Canadian Wheat Growers Association.
The association is a member of CAFTA, which represents a group of 19 Canadian agricultural industry associations advocating international trade liberalization at the WTO.
For Hoback, a grain farmer from Prince Albert, Sask., the dream deal to come out of this round of WTO talks would be the total elimination of that $54 a tonne albatross on crops.
"If we even get half of that, we're still making headway," he says.
In Hoback's case, eliminating these subsidies would mean putting $160,000 back on the table at his 1,200-hectare (3,000-acre) farm.
Grain and oilseed producers need a deal, he says. Soaring fuel costs tripled Hoback's harvesting costs this year, and sucked up the little profit he had from an otherwise good quality wheat, canola and barley crop.
Last year, an early frost hit Hoback with a loss $70 an acre -- and that's after all the program payouts from crop insurance and CAIS, he says.
Calculate that $70 per acre loss by 3,000 acres, and the total out-of-pocket loss hits a staggering $210,000.
Then there's the freight issue. The freight rate from Prince Albert to the nearest hub in North Battleford, a two hour drive away, is $12 a tonne.
Add another $53 if the load is shipped from North Battleford to the West Coast. All told, it's $65 a tonne to get the load positioned, he says.
With wheat, that works out to roughly $2 a bushel, or $8 an acre. Take a lower value crop like barley or oats, and it just doesn't make sense anymore, he says.
CAFTA vice-president Alanna Koch is confident this round of WTO talks, which end today, will produce an agreement that will lead to improved commodity prices and increased market access for Canadian farmers.
She's hoping other countries will follow the lead of a U.S. proposal, which calls for, among other things, wealthy countries to cut their farm tariffs by 55 to 90 per cent over the next five years, and eventually to zero.
Koch readily admits change won't happen overnight. And she's not expecting market access barriers will be reduced to zero, but believes a significant chunk of that $54 a tonne will be coming back to producers, once an agreement is signed.
The tariff on barley alone total $21 a tonne, she says, citing a 1999 study by the George Morris Centre that concluded tariff elimination over 10 years would bring $236 million annually to Canadian barley producers.
"Obviously, if this fellow (Bianchi) could get a portion of that $54 a tonne back, clearly that would be a benefit to him," she says.
Still, Koch says the WTO won't solve the agricultural woes caused by soaring input costs and the strengthening Canadian dollar against the greenback.
But it will help bring fundamental discipline to the international trade environment, she says.
In the short term, that means farmers have some tough decisions to make.
What's clear is that Canada's agricultural industry can't be sustained without long-term solutions, says the Canadian Federation of Agriculture's Friesen.
The federation has proposed a Canadian Farm Bill, pitched as a second-step to the Agricultural Policy Framework, the national program aimed at strengthening the agricultural sector for the long-term.
Friesen says the proposed bill will achieve strategic, long-term policies that will help farmers get more money out of the marketplace and move them to profitability.
"I know that alarm bells are ringing in government offices because of the amount of money that they're spending, but we also need to have alarm bells ringing because of what's happening to the rural infrastructure, of what's happening to the primary production sector, and job opportunities because of that, what's happening to businesses, so this is something that really needs to be turned around."
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High Cost of Farming
Farm cash receipts January to September 2005:
- Canada wide, total crop receipts fell 6.2 per cent to $9.9 billion.
- Revenues from wheat (excluding durum) fell 28.9 per cent to $1.3 billion from $1.8 billion in the first nine months of 2004.
- Barley receipts fell 36.7 per cent to $273 million from $431 million in the same period in 2004.
- Canola receipts fell to $1.3 billion, down from $1.5 billion in 2004.
Source: Statistics CanadaThe Calgary Herald
