Farm sector equity in Canada increased 8.9 per cent in 2007 to $252.3 billion, as assets rose more rapidly than liabilities. All provinces recorded an increase in equity in 2007, Statistics Canada reported Wednesday.
Farm assets rose to $302.2 billion in 2007, an 8.0 per cent increase over 2006, the federal statistics agency said. The value of farm real estate, which accounts for two-thirds of total farm assets, was the primary contributor, rising 8.8 per cent to $201.9 billion. The value of farm quotas, up $3.4 billion in 2007, was also a factor. Decreases in livestock and poultry were offset by increases in the value of crop inventories.
Farm liabilities, meanwhile, reached $49.8 billion, up 3.8 per cent from 2006. Current liabilities advanced 2.8 per cent, while long-term liabilities recorded an annual increase of 4.1 per cent. Prince Edward Island and New Brunswick were the only provinces to record declining liabilities in 2007.
The assets and liabilities in the balance sheet of the agricultural sector include those of farm businesses and non-operator landlords (farm real estate assets leased to farm operators and the corresponding liabilities). They exclude the personal portion of farm households. This most closely reflects the assets and liabilities used in the production of agricultural products, StatsCan said.
The debt-to-asset ratio continued to decline, reaching 16.5 per cent in 2007, its lowest level since 1999. This ratio measures the dependence of farm businesses on debt.
The assets-to-current liabilities ratio moved up to 2.268 in 2007 from 2.088 in 2006. The lower ratios recorded since 2003 mean that operators within the agricultural sector have a reduced ability to pay short-term debts compared with earlier periods.
The interest coverage ratio assesses the ability to cover interest charges with the net income generated (before interest and taxes). This ratio increased to 1.897 in 2007 from the record low of 1.549 in 2006.
Return on equity rose slightly to 1.1 per cent in 2007, following two consecutive annual decreases. The record low of 0.6 per cent was set in 2006.