History rhymes but doesn’t repeat

The United States is threatening both Canada’s economy and sovereignty. Commodity prices are wildly volatile. Inflation lurks in the background, causing worries interest rates will rise.

It’s a bucketful of uncertainty, and makes planning the path forward for any farm difficult, as we appear to be at the dawn of an era of tumult and chaos.

Why it matters: Ontario farmers are facing a lot of uncertainty, but that’s nothing new, and they can learn lessons from taking a historical perspective.

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We’ve been here before, most recently in the 1980s, also a period of trade and economic disruption. Then Canadian farmers were fighting off the hangover after the party of the 1970s had ended. The global economy was in tatters after the Arab oil embargo had nearly brought Western nations to their knees. And an export-oriented trade war had agricultural producers in Canada, Australia and Latin America ducking for cover as the U.S. and Europe traded punches in the international markets.

Two Ontario agriculture economists think there are lessons to be learned for today by taking a historical perspective — as they say, those who forget their history are condemned to repeat it.

Al Mussel, agricultural economist, research lead and founder of Agri-Food Economic Systems, and Alfons Weersink, professor at the University of Guelph’s department of Food, Agricultural and Resource Economics, highlight some of the main events and crises from four decades ago – some of which are echoed today.

Optimism to crisis

Just a decade ago, concerns about interest rate and commodity price trends prompted some to wonder whether a farm financial crisis, similar to that of the 1980s, would once again be possible. With so much interest in the subject, Weersink compiled a historical analysis comparing the economic and political climate then and now.

His overarching conclusion at that time – another agricultural financial crisis akin to the 1980s was unlikely, but troubled times were still possible.

The foundation for the 1980s crisis, wrote Weersink, was prepared during the 1970s – the era of U.S. Secretary of Agriculture Earl Butz and his “go big or get out,” and “plant fencerow to fencerow” mantras. During that time, record high crop prices, a push for consolidation, and general feelings of agricultural optimism spurred higher land values and corresponding levels of farm debt based on equity financing. There was, consequently, significant vulnerability to negative shocks across the sector.

Those shocks arrived early in the next decade in the form of depressed crop prices – a result of the old mantra that ‘high prices cure high prices,’ geo-politics fuelled embargos on exports to the communist Soviet Union, and other factors. Efforts to aggressively control inflation also spurred significant increases in interest rates to above 20 per cent in North America. In Canada, the result was a rise in farm bankruptcies, growing from 125 in 1979 to a high of 551 in 1984. This became known as the Farm Financial Crisis.

“In contrast to the early 1970s, when the prospects appeared unlimited, this was a very gloomy period for farming and rural communities,” writes Weersink, reflecting on his experiences working as an agricultural credit manager for the Bank of Montreal. “The social toll was significant.”

Hog disputes

For Mussel, the hog countervail case brought by the U.S. against Canada in the mid-1980’s was a critical — and underestimated — event of the period, that “cast a very long shadow” in how farm insurance programs developed in the decades since.

In this trade dispute, the U.S. accused Canada of providing unfair subsidies – in the form of price floors for pork based on multi-year averages – to hog farmers though a tripartite funding program shared between the federal and provincial governments, and farmers themselves.

“It was found to be a countervailable subsidy,” says Mussel. “This ruling stuck. It was debilitating. It certainly shrunk the pig industry in Canada, which at that time very much would have been in Ontario.”

Mussel adds other commodities, such as Canada’s beef sector, watched such trade dispute proceedings with much anxiety. The fear of additional trade disputes started a wider trend in farm insurance programs.

“The fear of countervail from the U.S. – and or dumping – really forced Canada out of commodity specific programming and steered us towards whole farm programming…Hogs set the tone for everything. Everything needed to be redesigned.”

That redesigning, according to both Weersink and Mussel, eventually resulted in the income-focused programs familiar to Canadian farmers today.

Export wars

Ironically at the same time what Mussel calls the “export subsidy wars” between the U.S. and the European Economic Community – the predecessor of today’s European Union — were raging.

Canadian farmers were caught in the middle of two actors wielding export subsidies for different products. From the European’s perspective, export subsidies were one of the strategies employed to strongly encourage food production after the continent had suffered a period of serious hardship following the Second World War. Indeed, Mussel says agriculture played a pivotal role in the formation of closer economic ties within Europe because “there were countries that starved during the war.”

“They poured on subsidies and other measures to protect and get their systems back up to the point where they could be comfortable with their level of food security,” Mussel says, adding that, by the 1980’s, over abundance of products like butter, milk, and crucially, wheat, became a problem. A similar state of affairs was occurring in the U.S., with both a surplus of wheat and export subsidies designed to move that wheat elsewhere.

“Theres nothing more discriminatory and distorting than export subsidies.,” Mussel says. “That’s why we got rid of them. Production subsidies protect farmers. But export subsidy makes it contingent on essetially dumping your garbage somewhere else. Canada was one of those places. We didn’t have those same programs.”

There were some protections for Canadian grain growers. However, they took a similar form to the tripartite arrangements in the hog sector, where farmers, along with the provinces and federal government, contributed to a pool of money to be used if the floor fell out from under per-acre wheat revenues. Billions in tripartite payments were made to farmers at the time – until the whole program defaulted. Part of the problem lay in previous success. Mussel says a run of good years pushed many producers to argue for their contributions back. Why, after all, should they contribute to a program which wasn’t needed?

The tripartite price guarantee wasn’t needed – until it was. Many farmers soon found themselves in a major financial pinch. Some survived the crisis. Others did not.

Mussel remembers a news broadcast from the time, the events depicted taking place near his home region in Ontario. Television crews had descended on a farm in the Listowel area to cover a “penny auction” – where people purchase assets at minimum prices from a business before its creditors (in this case, the bank) can take hold of said assets.

“All the guys had balaclavas on to not show their identity. The fact that people were in desperate enough straights they would do things like that, its crazy,” Mussel says. And while he doesn’t believe such cases were overly common, the example highlights the extremity of the wider financial strains on Canadian agriculture at the time.

Similarities and differences

How were conditions in 2015 — or today — similar to the 1980s? Experiencing an agricultural commodity price boom followed by a steady decline was one similarity, Weersink said, as was the general feeling of being hit with unexpected economic conditions. Conversely, there was a much stronger outlook and overall balance sheet for the agriculture sector, while interest rates were expected to (and indeed did) remain relatively stable.

Other impacts of the 1980s farm crisis include a shift away from beliefs of ownership above all – where a farmer feels they should personally own all assets in their operation – to a system featuring more flexibility through equipment leasing, land renting, and such like. While not a perfect system, Weersink indicated this does reduce the chance financial crunches could prove serious.

Off-farm income and specialization in niche markets is another insulating factor in the modern era, as is the number of risk management tools and flexibility to use them. If another farm financial crisis were to happen, though, Weersink says a greater differentiation between social and farm policy will play a role in how that crisis develops.

“If, and I emphasize if, there is another farm financial crisis, then it is important to distinguish between social policy and farm policy. In the 1980s, the two were inter-linked in some cases,” said Weersink in his 2015 writings.

“Interest rate reduction policies for all did not really help the ones who needed it most and slowed the adjustment within the sector. Farm policy should help ensure a competitive sector that is efficient and weather the inevitable storms. In contrast, social policy should help the disadvantaged. There were a number of distressed farm families during the Farm Financial Crisis, and there were some very important efforts to provide counseling to aid farmers in the difficult transition away from the farm. Hopefully, there is no need for such policies, but if there is, the distinction between farm and social policy is important.”

Another point was made – specifically, how in 2015, economic aberrations should be considered normal, not abnormal.

“The sector is inherently volatile due to its reliance on nature and global markets, so there will be inevitable swings in farm prices and subsequently net farm returns. One of the lessons from the events of 30 years ago is to recognize this uncertainty and be cautious in assuming aberrational conditions are the new norm.”

As of February 2025, Weersink says the same messages largely apply.

“One difference between now and 10 years ago is that I think the sector is heading into some headwinds. However, the overall financial situation is strong and interest rates are likely to drop rather than increase,” he says.