Downturn puts Canada farmers in a bind

Federal government announces bailout for farmers rattled by world financial crisis.

With the chaff from last fall's bumper harvest barely settled, Canada's farmers say they face a crisis in their industry.

Canada is a leader in the world agricultural market, its wheat considered among the best in the world and its cost of production, when compared with that of European farmers, efficient and profitable.

Though Canada is a small country, its volume of wheat exports is comparable to that of the United States. The agricultural industry ranks second, after manufacturing, in Canada's international balance of trade. Yet this output is the work of only 130,000 farming families scattered across the prairie provinces of Alberta, Manitoba, and Saskatchewan.

World prices for wheat and hogs have plummeted in the wake of the past year's financial collapse in Asia and Russia. The sudden drop in demand for high-grade wheat and pork comes after two years of high-yield crops and growing markets.

Farmers now face a loss of $60 (Canadian; US$39) for every hog they bring to market. Across the prairies, there are reports of farmers slaughtering animals in a bid to halt their losses.

"Very clearly the market is expecting the pork situation to be shortlived - disastrous, but shortlived," says Mel Lerohm, who farms southeast of Edmonton. He is also a professor of agricultural economics at the University of Alberta in Edmonton. "The grains situation will take a little longer to turn around, but we've seen the kind of fluctuations we're seeing now many times in the past."

Recently, the Canadian government announced a $900 million bailout for farmers hit by falling incomes. If provincial governments agree to take part in the scheme, that figure could rise to $1.5 billion. The government says the deal will comply with trade regulations of the World Trade Organization and North American Free Trade Agreement.

But across the prairies there is disagreement about the severity of the crisis. The price of wheat has historically been hard to predict. The recent drop comes after several years of high earnings. According to national statistics, average farm incomes reached near-record levels of $59,000 last year.

"The grain cycle is just going through another cycle, which is common to the grain industry," says Glen Goertzen, who farms south of Edmonton. "Yes, it's caused by the lack of purchasing power in the Pacific Rim countries, but if it wasn't that it would be something else." Mr. Goertzen, an adviser to the provincial government of Alberta, described the current problems as "a three-month crisis, not a long-term crisis."

Cynics say that the bailout for farmers has more to do with retaining land values for longtime farmers than saving a beleaguered industry. Under its expected formula, the payout will go only to farmers with a three-year record of earnings. Newcomers to the hog industry, for example, will be out of the game.