Drought Impacts Saskatchewan's Budget

The challenges met by agricultural producers in this province in light of this year’s growing season have had an impact on provincial coffers as reported by the province’s Finance Minister in the First Quarter Update.

The Saskatchewan 2021-2022 deficit now sits at a forecast $2.74 billion at first quarter. That number reflects a $126.5 million increase from original projections.

Minister Donna Harpauer attributes the majority of the increase to the necessary support for the agriculture sector, to the tune of over $700 million dollars, given the drought that has affected grain, pulse, and cattle producers.

"As everyone knows, we are having a very, very challenging year for our agriculture sector," Harpauer stated. "We are projecting that our crop insurance claims will be up an additional $588 million from where we projected in the budget. As well, we introduced a livestock support program, which is cost shared with the federal government, but the provincial contribution is $119 million."

As a long time rural MLA and former producer, Harpauer recognized the current situation is not a unique one, citing high crop claims in 1988 and again in 2002. She also admits that as the crop yields and quality become more evident, as does the situation with off-loading cattle herds, there will be additional government expenditures for the sector.

Despite the dire situation, Harpauer says that there are positive indicators when it comes to the larger agriculture picture. The large investments in canola crushing plants near Regina and Yorkton are among them. The Finance Minister also cites other investments and indicators that add a more positive light to the province’s finances.

"We’ve had almost $10 billion in private sector investment commitments in canola crush plants with three major investments there. We have a helium facility that’s been announced, and of course the BHP announcement and how they are going to advance their next phase."

The initial construction phase for each of these projects will inject immediate dollars into the economy with a promise in the longevity of production jobs once the projects come online.

Harpauer acknowledges there will be price increases for ag produce given the reduced volumes of grain, a beef supply that’s in flux, and the response of the markets to the shifts brought on by the drought.

"For what grain is out there, just being a producer in the past, I would predict the price is going to be very high because the drought was so widespread that there is going to be demand for that grain."

While that may be of little comfort, those prices may buoy some farming operations through the worst production season in years.

In spite of the new investments in other sectors, Harpauer recognizes that agriculture represents the backbone of the prairie economy and that it needs strength in that production for all corners of the province to flourish. The spin-off revenue from the purchase of equipment, production materials, and general farm and family needs drives local economies. That reflects the relative strength of the province's economy.

In spite of what has been a dismal year for most producers, Harpauer says the additional support needed for farmers will be there. So will continued incentives for outside investment in the ag sector.

"We have a number of incentive programs that are very narrow in what we are targeting, for example for value added, but we also have other incentive programs and they seem to be attracting those dollars."

Harpauer remains optimistic about the investors that continue to look at the province in terms of agriculture development. In the meantime, the provincial government continues to point to economic indicators that show continued progress, such as projected growth of GDP by 5.6 and 3.8 percent in 2021 and 2022 respectively.