Canadian farmers continued to pile on the debt in 2022, even as interest rates moved higher.
A Statistics Canada farm income report on Thursday showed total nationwide farm debt at the end of last year amounted to $138.5 billion, up 6.7% on the year. Farmers in Ontario continued to carry the heaviest debt load in the land, with the amount owing rising 6.1% on the year to $35.6 billion. Alberta debt increased just over 3% to $29.8 billion, with Saskatchewan debt up 6.7% to $20.3 billion, and Manitoba up 9.8% to $12.4 billion.
Most of the national farm debt in 2022 – more than $90 billion – was held between chartered banks and federal government agencies.
StatsCan reported Canadian farmers paid just over $5 billion in interest expenses in 2022, up a hefty 26.2% from the previous year, as interest rates have climbed. The Bank of Canada slashed its key overnight lending rate to near zero in the wake of the Covid-19 pandemic, but a rapid hiking cycle in the wake of runaway inflation now has the key rate sitting at 4.5%, the highest since 2007. With inflation cooling, the Bank of Canada has kept its rate on hold for two consecutive rate announcements.
Undermined by rising expenses, realized net farm income for Canadian farmers fell in 2022 after two years of big gains. Although total farm cash receipts were up 14.8% to $95 billion in 2022, that increase was more than offset by 21.2% increase in expenses to $72.5 billion, as farmers faced higher costs for key agricultural inputs, including fertilizer, feed and fuel – as well as interest. It marked the largest year-over-year increase in farm expenses since a 22% jump in 1974 and easily topped the previous year’s increase of 9.6%.
