Financial health in ag: Canada vs. the U.S.
Three trends discovered between the two countries
By Kaitlynn Anderson
After researchers from the University of Illinois released a review of the U.S. farm sector in late September, Farm Credit Canada (FCC) compared the financial health of Canada and the States.
FCC discovered three trends between the neighbouring countries.
First, “farmland and buildings represent a greater proportion of farm assets in the U.S.,” according to a recent FCC article.
Farmland and buildings account for 83 per cent of all assets in the U.S., while this value is 75 per cent in Canada.
Both countries saw this number increase from 2012.
Second, while the current ratio (a liquidity ratio that measures a company's ability to pay short-term and long-term obligations, according to Investopedia) for Canadian farms remains healthy, the U.S. holds a concerning value.
The current ratio has dropped to 1.55 in the U.S., which is below the benchmark of 2, according to the article.
This means that “liquidity is a major concern for U.S. farms,” according to FCC.
In Canada, the value is above the benchmark at 2.31.
Third, the value of farm assets in both countries remains strong, according to FCC.
The U.S. report reveals that this strength in solvency, which is slightly higher than 2012, is due to strong land values.
Solvency provides “an indication of the farm's ability to repay all financial obligations if all assets are sold, as well as an indication of the ability to continue operations as a viable farm business after a financial adversity, such as drought,” according to the U of I report.