Editor’s Column: The farm income news is not good news

What exactly is “realized net farm income”? 

Editor’s Column: The farm income news is not good news

The news app on my phone keeps bringing up more worrying headlines about agricultural trade problems that will lead to lower farm prices. Twitter is full of grim photos of durum headed out before its time and canola crops with bare patches.

I won’t write here that, as of the end of June, crops in southeast Saskatchewan were doing all right. I’ll leave that out for fear of jinxing our good luck and irritating farmers in less fortunate areas.

Instead, I’ll tell you some more ugly news — in detail, with a chart (see at top).

When Statistics Canada released its annual Farm Income dataset late this spring, the numbers were not good. The press release said: “The realized net farm income of agricultural producers fell 45.1 per cent in 2018 to $3.9 billion, the largest percentage decrease since 2006.”

First, what exactly is “realized net farm income”?

To get there, let’s start with “net cash income.” This is straightforward — income from selling crops and livestock, plus government program payouts, minus expenses. That’s all.

From net cash income, to get to “realized net farm income,” Stats Canada adds “income in kind,” and subtracts depreciation costs. A farmer who had similar income and expenses for two years in a row — but bought a brand new combine in Year 2 — would have higher depreciation costs in the second year. This would mean a lower realized net farm income. (Income in kind measures “commodities produced on farms and consumed by individuals living on these farm operations.” I’ve no idea how they’re accounting for the lentils I’ve cooked and the spring wheat I’ve ground into flour.)

Rather than realized net farm income, the chart above shows net cash income. This is the cash farmers have on hand to repay debts, invest, or withdraw for personal use. The decline in net cash income on the Prairies isn’t as grim as the national drop in realized net farm income, but it did fall 31 per cent in Alberta, 16 per cent in Saskatchewan and 19 per cent in Manitoba from 2017 to 2018. Saskatchewan farmers are still sliding down from a peak in 2015. Alberta and Manitoba saw a peak in net cash income in 2017 and were back on the other side of it in 2018.

We may find our way out of this by increasing our income in kind. Can you even put a price on a good bowl of lentil soup with homemade bread made from your own wheat?

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