Canadian farm finances deteriorated slightly last year but remain in good condition, according to a Farm Credit Canada analyst.
FCC product analyst Isabelle Djossi says the financial situation was weakened in 2019 by weather, trade issues, lower commodity price, and higher input costs.
The 2019 balance sheet of agriculture by Statistics Canada “reveals agriculture weakened but remains healthy and well-positioned to face the current challenges…”
A benchmark measure of current financial health, also known as working capital, has softened with a 2.2 ratio, down from 2.62 in 2015.
This measure tells how well farmers can meet current expense need. The 2.2 ratio means farmers have on average $2.20 capital available for every $1 owed in the current year.
A ratio of 1.5 or better is generally considered healthy.
Djossi said the decline in the ratio comes from reduced grain inventories when three million acres were left unharvested and falling oilseed inventory values from trade matters.
Expense ratios grew with higher input costs and less cash coming in.
Farm profitability has declined to 1.3 per cent return on equity last year — the same as in 2018. In 2015 the return on equity was 2.2 per cent.
Cash flow to cover interest payments has declined as well, standing at 2.39 times in 2019, down from 2.55 times in 2018 and 4.05 times in 2015.
Farm assets of $655.3 billion in 2019 had increased 22.5 per cent in five years. Of that, farm real estate worth $498.4 billion increased 28.3 per cent.
The increase in farm real estate values contributed substantially to farm wealth and financial health.
Ron Walter can be reached at ronjoy@sasktel.net
