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Farmers expected to feel money crunch in spring

KIMBERLY STINSON

For Northumberland County farmers, the crunch from the current economic downturn will be felt in spring, says Lyle Gallagher, farmer and president of the Northumberland Federation of Agriculture (NFA). This is when farmers may need to borrow cash to plant crops.

These operating loans are used to cover the cost of planting and are typically paid off when the harvest is sold.

The amount of operating loans varies from farm to farm, says Mr. Gallagher. A ballpark for the average loan would be $200,000, but there are a couple that approach $2 million.

Paul Burnham runs Burnham Family Farm Market on County Road 2 between Cobourg and Port Hope and farms 1,000 acres of land. He agrees with Mr. Gallagher's assessment for another reason.

"We haven't seen the effect yet, because there is naturally a slowdown (in the business) at this time of year."

Mr. Burnham, who is a member of both the Northumberland Quinte-West Agricultural Advisory Committee and the NFA's board of directors, adds he has heard from other farmers that some banks have begun clamping down on operating loans.

"Everything was looking great (earlier this year). It was unprecedented," says Mr. Gallagher.

Alan Cole, who has produced beans, corn and wheat east of Bewdley since 1974, says he just wants to make a living out of the market. But farmers are particularly affected by fluctuations in the cost of seed, fertilizer, fuel and chemical sprays -- fuel being the major expense -- which can make this difficult.

Mr. Cole says fertilizer costs could double for next year, with the cost of seed and herbicides rising 20% and five to 10% respectively.

"It is tough when you buy (supplies) retail and sell (crops) wholesale," says Mr. Gallagher.

And now the price farmers receive for commodities has dropped from the high figures of early spring and summer down to levels seen two or three years ago, while input costs continue to rise.

Cash crops like corn and soybeans are tied to commodity pricing which is influenced by weather, volatility and seasonality. It is also tied to the value of the Canadian dollar so a crop's value is constantly in flux, particularly during harvest, explains Mr. Gallagher.

"Crop values can change two or three times a day," says Mr. Cole. "It is hard for the average person to adjust."

In light of the current economic situation, Dan Borowec, Northumberland County's director of economic development and tourism, says "no doubt credit will become more difficult to acquire. The banking community will be more cautious in extending credit."

Mr Borowec adds, "It is hard enough (for farmers) to make a buck to start with, but add to that the current economic challenges . . . Well, we'll have to see where things go."

On a positive note, the NFA and Northumberland County are working together to explore opportunities for renewal in the agribusiness sector.

"The county will play a supportive role to assist the farming community in areas that they deem a priority," says Mr. Borowec.

The recent release of the Northumberland County Agriculture

Action Plan from the county's economic development and tourism department is well-timed. It is "a market analysis of the county's agriculture industry and assessment of sector opportunities to support present and future agrifood business."

According to statistics cited by the plan, 17% of agricultural enterprise in Ontario has disappeared over the last 15 years. In Northumberland alone, the decline was 30%.

Northumberland County initiatives include research and development of alternative crops for farmers, and renewal of the agriculture community.

To assist with these strategic initiatives, Mr. Borowec hopes for a willingness to co-operate from the higher levels of government, despite recent announcements that suggest money will be tight. He also hopes to see public-sector support as they move forward.

Mr. Borowec explains that "part of the challenge (for farming) is to find diversification through alternative crops not affected by commodity pricing."

An alternative crop under study for this area is industrial hemp. Hemp would not be subject to the price fluctuations of current cash crops and so could provide some stability for farmers.

Industrial hemp was first seeded on the north shore of Lake Ontario by the British more than 200 years ago to make rope and sail cloth for the British navy.

Today hemp seed, oil and fibre are used in a variety of products, from beer and body-care items to construction materials, and it is a "green" product that actually revitalizes the soil by adding nitrogen during the growing process.

Currently, a major obstacle to growing hemp locally is the lack of a processing facility.

"There really is no where to ship right now," says Mr. Borowec.

The nearest processing facility for hemp fibre is Stemergy in Delaware, Ont., and it is a smaller facility still trying to perfect its technology.

Transporting hemp to this facility would not be feasible anyway, says Mr. Borowec. He explains that to be cost-effective the processing facility needs to lie within a 100-kilometre radius of the hemp farm. Hemp is bulky, but lightweight, which makes transportation costs prohibitive.

There are hopes that a processing facility will be built in this area, but a consistent supply of hemp to meet the processing demand must also be established, and a reliable market found. Each stage is difficult to confirm without the other in place, but there is currently a project under discussion, says Mr. Borowec.

Mr. Cole also believes hemp shows promise, but says infrastructure needs to be in place before people will jump into it.

"At the moment, there is no mechanism in place to guarantee someone to buy the crop."

He adds that almost all farms have land that is not well suited to corn or beans on which hemp could do well; he says it is just too risky right now.

As for agri-food companies in Northumberland, there are not many large-scale businesses, but those here vary from maple syrup producers to the latest vineyard, says Mr. Borowec. But again, credit will be the issue.

"Money as a whole will become tight and it will depend on their (the business') relationship with the bank. It's a vicious circle -- you can't find funds to build when the bank is asking who is going to buy."

The county also plans to pay special attention to attracting people to the farm industry, and engaging youth in agriculture. With farming in decline, attracting youth to the land becomes vital to renewal.

Increasing 4-H participation and developing agricultural education programs in public and secondary schools are two of the action plan recommendations.

And Mr. Burnham's son, Mark, is bucking the youth trend and will return to work with the family agribusiness after completing his engineering degree from McGill University in Montreal.

With more than 30 years of farm experience under his belt, Paul Burnham says, "I wouldn't do it if I didn't like it because there are easier ways to make a living."

But, Mr. Borowec notes "farmers are a pretty resourceful lot."

And Northumberland County's economic development and tourism office will continue to offer a forum for community dialogue and explore alternatives for crop diversification, Mr. Borowec confirms.

Mr. Burnham suggests people ask questions of farmers and check out the Internet for information about their food in order to understand where it comes from. Shoppers can then make an educated choice about where to shop, what to buy and how much to pay.

Northumberland's Buy Local campaign has, so far, been a buffer for Mr. Burnham during the current economic climate change.

"Shopping locally keeps our stores (and agri-business) healthy."