Economics plays a major role in the sustainability of agriculture. To be sustainable, agriculture must be economically viable. That is not to imply that all producers or all forms of production must be viable in any region at a particular time. Variations in the returns are necessary and indeed desirable. They stimulate change in the mix of products produced, thereby achieving consistency with the demands of the market.

The emphasis on grain production on the prairies combined with the associated dependence on export markets has rendered the prairie region highly susceptible to changes in the world economy. Trade policies of other nations can and do impact severely on the region. In consequence, government has been moved to alleviate the ensuing distress through various programs of assistance.

Farm income received from the marketplace has varied significantly over time, a pattern no more evident in any combination of products than in grains and oilseeds. In recent years, shortfalls of producer income have been partly assuaged by large infusions of government funds. The magnitude of these infusions is very impressive. Total federal government assistance programs for the grains and oilseeds sector reached $3923 million in 1991/92¹. As a result, the fluctuations in farm income were much less than they otherwise would have been, thereby reducing the financial stress of many producers. While the money was very acceptable on the part of the recipients, little was accomplished in terms of reorienting of agriculture on the prairies in a more sustainable direction. Land prices were maintained at levels higher than those which could be supported by returns from the market. Desirable change in farm structure was retarded and little change occurred in the mix of products produced.

Data on the relative stability of farm cash receipts on the prairies are presented in Table 1. A propensity for receipts from the six major grains to decline is evident during the 1987-91 period, a decline of 12 percent being recorded. Meanwhile receipts from other crops increased by 12 percent. Receipts from sales of livestock and livestock products increased by 8 percent. During the same period, program payments declined by 47 percent. The net result was that total receipts declined by 4 percent. The program payments while enhancing income stability on the prairies also can be said to have limited the urgency for needed farm adjustment.

Table 1: Farm Cash Receipts, Prairie Provinces, 1987-91

Income Source	1987	1988	1989	1990	1991*
	million dollars
Six Major Grains**	4837.9	4635.1	4396.9	4397.5	4280.7
Other Crops	461.3	475.6	488.6	541.7	574.2
Livestock and Products	3558.4	3749.2	3828.5	3962.8	3850.3
Program Payments***	2602.3	2378.9	2209.5	964.9	1373.3
Total (as calculated)	10459.9	11238.8	10896.5	10046.9	10078.5
	percent
Program Payments/Total	24.9	21.2	20.3	9.6	13.6

* Preliminary

** Wheat, Oats, Barley, Rye, Flaxseed, Canola.

*** Crop Insurance, NISA GRIP, WGSA, ASA Price Stabilization, ASA Tripartite Plans, Provincial Stabilization Plans, Dairy Subsidy, Other Payments

By providing subsidies to producers to reduce food costs, consumers are limited in their ability to choose where they want to spend their money. Consumers are essentially supplying the producers with subsidies for food production. Yet it is possible that consumers are more interested in spending their money on products which provide them with greater satisfaction. The government subsidies force all taxpayers to assist in lowering food costs. When all externalities are accounted for in the price, consumers who would rather spend their money on something else are made worse off, as are those who would spend their money on other products that have lower production costs. Moreover, the viability of those businesses where the consumer's funds would otherwise have been spent comes into question.

Government infusion of funds to agriculture cannot be expected to continue as it has because deficits have accumulated to the extent that any additional debt is difficult to support. Under this situation it becomes necessary to rely on the marketplace for returns, rendering an even more satisfying resolution, at least in part, to the trade issue through the new GATT agreement. A more diverse agriculture on the prairies appears desirable, particularly between farms. Unfortunately, transport policy runs counter to indications from the marketplace that a more livestock oriented farm economy would provide increased returns and absorb greater quantities of the grain produced. Such an economy would enhance the sustainability of agriculture.

While it has been argued that higher prices for products would overcome the economic problems of agriculture, history has shown that this is not necessarily the case. Changes in farm structure occur in high price periods as producers in favourable financial circumstances, or those willing to assume high levels of debt bid up land prices. In low price periods, structural change continues as the farms of those who leave the industry are purchased by those having more capital. Regardless of government asistance policies, structural change continues. On the prairies, this structural change is driven by changing technology in grain production. This technology entails minimum tillage practices that utilize improved cultivation and seeding equipment, materials which are economically feasible only when used on large acreages. While this technology is positive for sustainability, substantial structural change is ccurring that is rendering surplus many farm workers. Where farms specialize in grain production, significant underemployment in farm activities occurs during a substantial portion of the year.

Under existing economic conditions, additional income is needed to support the farm and farm family. Off-farm employment is often undertaken, initially as a means to overcome a short term economic crunch. Later, off-farm employment becomes a deliberate choice to diversify and raise the level of family income in order to enjoy the amenities available in urban areas². While technology in agriculture has enabled farm men to enter the off-farm labour force, participation by farm women has been rendered feasible by labour saving devices in the home and a reduction in family size. A substantial proportion of farm women are therefore able to capitalize on their training by obtaining employment at the professional and managerial levels in nearby communities. Improved transportation facilities have rendered feasible greater commuting distances from the farm to the employment site.

Off-farm employment may be said to represent a partial adjustment of labour away from agriculture while continuing farm production. This measure enables the attributes of rural living to continue to be enjoyed. Over time the returns from off-farm employment may outweigh those received from agriculture.

Off-farm employment income has become a substantial proportion of the total income received by farm families. While off-farm income represents a proportionately larger share of total income for families on small farms than on large farms, it represents a significant proportion of the total received even on high- income farms. Off-farm income is expressed in terms of total farm operator income in Table 2. Members of farm families have to compete in the same labour markets for the off-farm proportion of their incomes as the rest of the population. In order to compete they must have at least the same level of skill and education.

In rural areas, there is need for wealth-generating activities other than agriculture to utilize fully the labour available, particularly on grain farms, and to provide greater economic stability to these areas. Progress is being made as service and other industries expand in these areas. One such example is the location of production of new-technology farm equipment in rural areas that possess the necessary infrastructure.

Table 2: Off-Farm Income* as a Proportion of Total Operator Income** by Income Range, Prairie Provinces and Canada 1990 and 1991

	Income range (thousand dollars)
	10-24.9	25.0-49.9	50.9-99.9	100.0-249.9	over 250.0	all ranges
1990	percent
Canada	99.3	79.0	53.7	30.9	29.1	59.6
Manitoba	99.0	76.7	48.8	27.1	18.3	56.9
Saskatchewan	90.5	68.8	43.5	28.2	24.2	54.6
Alberta	100.3	83.2	61.1	37.5	35.9	66.3
1991
Canada	98.1	79.3	47.9	25.2	18.8	55.5
Manitoba	94.5	73.1	42.4	21.1	15.2	47.6
Saskatchewan	86.6	65.8	39.6	23.5	19.8	50.0
Alberta	n/a	82.3	55.2	32.3	24.8	63.8

n/a - not available

* Includes wages and salaries, net off-farm self employment, investment income, pension income and other off-farm income.

** Includes off-farm income and operating revenues less operating expenses.

Source: Statistics Canada, Agricultural Financial Statistics, 21-205

The above data indicate that on average about half or more of the income received by farm operators comes from non-farm sources. The proportion declines as income rises. The proportion of operator income received from off-farm sources remains significant, even for those operators having incomes of $250,000 or more where the off-farm income received exceeded $37,500 per operator. The proportion of off-farm income declined as farm-operator income increased, the range for the individual operator income classes being 58.0 to 24.2 percent in 1990 and 59.7 to 38.0 percent in 1991.

Other relevant IISD material:

Sustainable Livelihoods Section

Additional sites of interest:

Agriculture and Argi-Food Canada: Market Reports

USDA Economic Research Service

USDA, National Agricultural Statistics Service: Today's Reports

INDEX:

Great Plains Home Page

Measurement of Sustainability

Land Use

Degradation of Soil Resources

Preservation of Biodiversity

Water Use and Quality

Rural Communities

Economic Situation

Use of Common Property

Impacts of Trade on Sustainability

Federal & Provincial Policies

Global Changes