With producers adding on again in 2023, Canadian farm debt has now more than doubled in just over a decade.
A Statistics Canada farm income report released earlier this week showed collective national farm debt stood at $146 billion at the end of last year, up 4.1% from the previous year and an increase of about 103% from the 2012 level of $71.8 billion. The bulk of the 2023 farm debt was owed to chartered banks and federal government agencies at about $51 billion and $43 billion, respectively, with credit unions owed around $22.3 billion.
Ontario farm debt was reported at the end of 2023 was reported at $37.7 billion, up 5.3% on the year, while Quebec farm debt increased 6.9% to about $29 billion. Saskatchewan farm debt increased 2.5% to $21 billion, and Alberta debt was up 6.8% to $31.8 billion. Farm debt in Manitoba actually declined slightly in 2023, easing 0.3% to $12.4 billion.
Rising farm debt was one of the reasons national farm interest rate costs jumped nearly 39% to $6.9 billion in 2023, although higher average interest rate costs – which were up by more than one-third last year – were a bigger factor. It marked the largest annual increase in farm interest expenses since 1981, when they soared more than 50% as the average prime rate hit an all-time high of 22.75%.
The Bank of Canada's key overnight lending rate increased 10 times between March 2022 and July 2023, reaching a high of 5%. However, borrowers are getting some relief now. Amid cooling inflation, the central bank started cutting rates this past June, with the policy rate falling to the current 3.75%. Most analysts and economists are projecting further interest rate reductions in the months ahead.
Despite the rising debt load, Canadian farmers still appear to be in reasonable financial shape, thanks rising asset values, particularly land.
The value of equity in Canada's farm sector totalled $729.9 billion as of Dec. 31, 2022, up by $83.6 billion or almost 13% from the same date a year earlier. The value of total assets grew by 12% to $861.5 billion in 2022, while liabilities rose by 7.1% to $131.5 billion.
StatsCan will release its 2023 farm equity report early in the New Year.
