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Abstract
Several studies examined the impacts of the bovine spongiform encephalopathy (BSE) crisis on the Canadian agricultural sector. However, few investigations determined the on-farm financial repercussions arising from the crisis. This study examined impacts at farm level attributed to the BSE crisis. Cash flow and hedonic price models were used to examine changes in farm wealth for the years 2002 through 2007. While BSE received substantial media coverage, little attention was given to exchange rates and land values. Data demonstrated that exchange-rate fluctuations exerted a much greater impact on producer wealth than did the BSE crisis. Both farm equity and land values temporarily dipped following the BSE crisis but have since followed their previous trend. If the United States had not closed its borders to Canadian beef and cattle exports, producers would have an additional 0.65% growth in wealth. However, had exchange rates remained constant, farmers would have an additional 10.75% increase in equity. Consequently, the BSE crisis produced a smaller impact on farmer wealth than factors that received less media attention.
Acknowledgements
Financial support for this research was generously provided by the Alberta Prion Research Institute. We also thank Alberta Agriculture and Rural Development for granting access to the cow–calf data.
Notes
*Different capital structures were also examined to assess the impacts of BSE and exchange rates on “newer” versus “established” agribusinesses. Producers with higher debt levels—i.e., newer farms—faced solvency problems in the model. Only results for the Aspen Parklands “large” farm are presented. The results for the other regions' large farms have similar patterns. “Smaller” farms showed greater vulnerability to the exchange rate fluctuations, but demonstrated comparable results with respect to the impacts of the BSE crisis. All results are available from the authors.