It would not take a very high increase in interest rates for many farms to find themselves in a difficult situation. This would particularly affect the businesses that started up in the past few years, because their debt level is normally higher than that of businesses that started up 20 or 25 years ago.
We have not done any studies to determine what type of interest rate increase—one, two or three percentage points—would tip the balance. Every farm's situation is different. It is interesting to note that the value of agricultural assets has increased, like their size. Assets leverage borrowing capacity, but the capacity for reimbursement is always the fundamental element in the profitability of a business.
Often the young people who start up a farm do not have assets to allow them to acquire credit, and it is difficult for them. An enterprise that is a going concern and has accumulated assets has easier access to credit, but that is more difficult for someone who does not have assets. That is why we speak of “patient capital”. If we want the new generation of farmers to continue farming, we have to find a way of providing patient capital to them so that they have a chance to constitute farm assets.
It's a cyclical situation. In 1969, my father started a dairy cattle farm. He had to decide whether to stop or keep going. He obtained a 39-year loan from the Quebec Farm Credit Bureau, at a guaranteed interest rate of 2%. That was patient capital. This is what allowed Quebec agriculture to take off in the 1970s. The mechanisms they had at the time worked well.