Canadian farm sector equity growth slowed for the first time in five years in 2024, as liabilities increased at a faster pace than assets.
According to a Statistics Canada report Thursday, national farm sector equity as of Dec. 31, 2024 amounted to $38.9 billion, a 4.9% increase from a year earlier and down from the 7.8% gain recorded in 2023. Total farm liabilities were up 14.4% to $159 billion in 2024 – the largest increase on records dating back to 1981 – and easily outpacing the 6.3% gain in total assets to $991.5 billion, the report said.
Farm equity rose in every province, with gains in Saskatchewan and Alberta at 9.8% and 5.5%, respectively, accounting for over two-thirds of the national increase.
Meanwhile, the report showed some further erosion in farmers’ financial strength as well.
The interest coverage ratio, which measures a farm business's ability to meet its interest payments, fell for the second consecutive year, settling at 2.12 as of Dec. 31, 2024 - the ratio's lowest level since 2007. The interest coverage ratio continued to deteriorate because of a decrease in net farm income, which was due to the drop in crop inventories and higher interest expenses, StatsCan said.
(A lower interest coverage ratio - net income before taxes plus interest expense, divided by interest expense - indicates that businesses are less able to service their debt obligations).
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