Optimism shines in ag survey

© AgMedia Inc.

Most Canadian farmers are hopeful about agriculture’s prospects


Be careful for what you wish for in optimism , we might get more than we bargined for. Remember the go go 70s them 23 % interest and debt review of the 80s

he said, and “for lenders, it’s fun. You’re dealing with people who are keen about the industry and the business they’re in and it’s much more fun than lending in tough times.”

We have seen these lenders before and then they become hard core collectors

There's an old saying that, especially in agriculture, things always look the rosiest, just before they crash. For those with long memories, farmers were equally, if not more, optimistic about the future in the late 70s, just before the effective 50% crash in farmland values which brought us penny auctions and the Farm Debt Review Board.

It's really too bad FCC, and seemingly too many of the farmers they surveyed, don't seem to understand that high price/earnings multiples for farm land, and the fact that too much of our current so-called farm prosperity is based not on economics, but on legislation, should scare both farmers and lenders, not enthuse them.

Stephen Thompson, Clinton ON

Debt review was needed in the 30s and some degreein the 80s but alot who got debt write downs in the 80s didnt learn and now if debt review has to come in again should not reward farmers a free ride. Let these guys go down the next time

Farmers will never learn, a new crop of hard heads are produced every generation.90% of farmleaders dont have a clue about price/earnings multiples

While it is true that excessive expansion did hurt quite a few, there was also great amounts of equity built during the 70's that set up many farm operations. No doubt land values are over heated right now however the percentage of farmers actually trading hands at those values is very small. In the future some of these purchasers may look back with regret but its quite pssible that the regret will be for a poor investment and not a catastrophe that up sets their operation.

At this point there is little to suggest the types of inflationary factors are present that would lead to the extraordinary interest rates of the 80's. There are virtually no segments of agriculture (or most business sectors)that can support 18-20% interest rates. While a certain caution is always advisable there are certainly things in Canadian Agriculture that warrant some optimism.

Just about the only things warranting optimism in Canadian agriculture at the moment are those sectors (dairy, poultry, grains) which owe their optimism to legislation, both here and in the US, rather than to the realism of underlying economic principles.

Furthermore, I disagree with your assessment of the effect of interest rates - it would seem to me one would be in less difficulty paying 20% interest on an asset bought at a price/earnings multiple of 10:1, than paying 3% intrest to buy something at a price/earnings multiple of 50:1 which is about where we are with land prices at the moment.

After having experienced both high interest rates, and low interest rates, I'd far-sooner have high interest rates because people make far-better decisions which cause far-less grief both to themselves and to others.

The biggest lesson this generation of farmers hasn't yet learned, is that low interest rates are far-more harmful to any industry, and the businesses in it, than high interest rates - therefore, the optimism of those surveyed isn't founded on

(1) the reality of the adverse effects of low interest rates,
(2) the reality of stratospheric price/earnings multiples, and
(3) the reality of the long-term folly of basing the very existence of any venture on the whim of government.

Stephen Thompson, Clinton ON

High interest rates are crippling to economic growth. A 10 to 1 price to earning multiple on land with 20% interest rates simply isn't going to happen. I don't think current land prices are warranted but to "wish" for double digit interest rates is pure folly.

Post new comment

To prevent automated spam submissions leave this field empty.
We welcome thoughtful comments and ideas. Comments must be on topic. Cheap shots, unsubstantiated allegations, anonymous attacks or negativity directed against people and organizations will not be published. Comments are modified or deleted at the discretion of the editors. If you wish to be identified by name, which will give your opinion far more weight and provide a far greater chance of being published, leave a telephone number so that identity can be confirmed. The number will not be published.