Canadian Farm Debt Rose in 2004

OTTAWA - Jan 18/06 - SNS -- Debt levels on Canadian farms rose in 2004, according to Statistics Canada, climbing 4.7% to $44.9 billion from 2003, the 11th consecutive annual rise.

Current liabilities increased 3.5% while long-term liabilities recorded an annual increase of 5.1%. Farm sector equity in Canada was up 1.7% in 2004 to $185.6 billion as both assets and liabilities rose. The value of farm real estate continued the steady growth started in 1988. It went up by 2.4% in 2004 and was the main contributor to the increase in assets.

The debt-to-asset ratio increased for the ninth consecutive year, and stood at 19.5% in 2004. This ratio, which measures the dependence of farm businesses on debt, reached a new record for the 1981 to 2004 period, slightly above the 19.0%, reached in 2003. The lowest ratio occurred in 1981 at 12.4%.

After reaching its lowest level since 1981 in 2003, the assets-to-current liabilities ratio went up slightly in 2004 to 2.045. The lower levels recorded in the past two years mean that the operators within the agriculture sector had a lower ability to pay short-term debts compared to the 1981 to 2002 period.

The interest coverage ratio, which indicates the ability to pay interest charges and to protect creditors from interest payment default reached 3.316, the highest level since 1996 and well above the previous 10-year average (1994 to 2003).