The Rural Voice, 1981-12, Page 8Going for broke?
Are you one of the farmers in "dire straits"?
Are you going to be one of the survivors?
by Bev Brown
(Editor's note: Not everyone will agree
with some of the statements or conclu-
sions in this article. The Rural Voice
talked with several accountants, book-
keepers, banks as well as producers and
we wanted to present a balanced look at
the current problems as seen from
different viewpoints..)
The headlines have been sounding the
alarm: "Young Farm Family Faces
Bankruptcy". Both radio and TV have
been telling the stories of many beef and
hog producers who will be out of business
before the end of 1981. And anyone out
for a Sunday drive can count the farms
with "For Sale" signs decorating the
fence posts. These who have attended
any of the O.F.A. Task Force hearings
have listened to briefs predicting doom
and gloom for agriculture in Ontario and
many of these have been backed up with
facts and figures.
But as the interest rates zoomed
upwards and many commodity prices
spiralled downwards, observers of the
farm scene wondered why the farm
community remained so quiet-- few
letters to the editors of daily papers (read
by most Ottawa nolitirians) bewailed the
farmer's plight and even tewer individual
letters were received by the politicians.
Some people say it's because farmers
have lost hope that anything can be done
to help them now. But maybe it's because
there's a group of farmers out there,
both young and old, who are holding their
own. Few of them want any publicity, so
they have been keeping a low profile.
Only their banker (or their accountant)
knows their financial status, and he isn't
talking. The question is, how many
farmers are in this category?
Everyone wants to play the number
game-- reporters, farmers, bankers and
especially politicians. How many beef
farmers are going broke in the next six
months (or have gone broke in the past
six months?) What percentage of farmers
are in real financial difficulties (or just
how do you define "dire straits")? It all
makes for good headlines in the papers
and it certainly makes the question period
in the House more lively.
But the question few people are
bending their intellect to answer is: Can
Canada survive if we continue to lose
farmers who ao broke or retire, and the
young farmer cannot afford to get into the
business? History books tell us that no
country can continue as an independent
economic state once it lets its agricultural
industry go down the tube. "Farmers are
the backbone of the nation" applied in
Caesar's time as well as in Trudeau's. The
Greek philosopher Socates said: "Nobody
is qualified to become a statesman who is
entirely ignorant of the problem of wheat
(agriculture)"
Allan McEachen's November budget
didn't have a great deal of short or long
term help for farmers. One measure the
feds adopted though was suggested by
one of the accountants we talked to before
the budget. Ease the restrictions on small
business development bonds (present
interest rate is about 121/2 per cent) so that
non -incorporated farmers could buy them,
he suggested. That has now been done
and the accountant felt would help many
farmers stay in business.
Statistics and figures can be very
misleading. For instance, if you see a
report saying that more farmers are
PG. 8 THE RURAL VOICE/ DECEMBER 1981
paying more income tax in 1981 than ever
before, do not leap to the conclusion that
.gross farm income has increased. The
explanation is that farmers are using their
harvest dollars to reduce the principal on
their high interest loans. This payment is
not a tax deductible expenditure, so the
farmer's taxable income will be higher
than usual. Normally. the farmer would
use this money to buy fertilizer or
equipment. Of course, this is bad news for
the fertilizer and equipment dealers.
But let's get back to those farmers who
are managing to survive. Are there any
common denominators to describe these
survivors?
One accountant reported that partner-
ships which included an older farmer who
had lived through the depression and
knew how to survive hard times, were the
ones who are staying on top now. They
may not be making as much money as they
used to make, but they are holding their
own. They have a conservative approach
to financial management and have learned
how to put something aside for a rainy
day. Another key factor ' with these
surviving partnerships is the wisdom to
know when they need advice, the ability to
choose the right expert and the willing-
ness to accept the advice.
And then there are the young farmers
who have been in the business for less
than ten years and seem to be getting
ahead. They also have certain things in
common. Many of them have completed
either two or four-vear agricultural
management courses or the equivalent.
This enabled them to get high paying jobs
and most of them worked off the farm for a
at (east the first five years.
Another key tactor with these young
farmers is their ability to shop around for
credit and banking services. Most of these