Net farm income rises on lower costs in 2010

Realized net farm income in Canada amounted to $4.5 billion in 2010 — a 46.1 per cent increase from 2009, as a decline in operating costs outpaced a slight dip in receipts, according to Statistics Canada.

The increase in 2010 followed a 16.6 per cent drop in 2009, the federal statistics agency said in a report Wednesday.

Realized net income — the difference between a farmer’s cash receipts and operating expenses, minus depreciation, plus income in kind — increased in every province except Alberta and New Brunswick. In these two provinces, declines in receipts exceeded declines in expenses.

Receipts

Farm cash receipts, which include crop and livestock revenues plus program payments, fell 0.2 per cent to $44.4 billion in 2010, the second consecutive annual decline.

Market receipts, which include only revenue from the sale of crops and livestock, increased 0.1 per cent to $41.3 billion. A rise in livestock receipts barely offset declining crop receipts.

Crop receipts fell 3.3 per cent to $22.4 billion, as wheat (including durum) and barley receipts fell sharply on lower prices and marketings. The weighted average price for most grains and oilseeds was lower in 2010 than in 2009, despite price increases in the latter half of 2010.

Increased marketings of oilseeds in 2010 pushed receipts 16.5 per cent higher for soybeans and 9.6 per cent higher for canola.

Potato receipts fell nine per cent as a result of lower prices and marketings compared with 2009 levels.

Livestock receipts increased 4.5 per cent to $18.9 billion in the wake of higher hog and cattle prices. Hog receipts rose 15.4 per cent on the strength of a 19.1 per cent increase in prices. The average annual price in 2010 was $56.30 per hundredweight (cwt), the highest since 2005. Cattle and calf receipts rose five per cent, again on price increases.

Receipts from supply-managed commodities (dairy, poultry and eggs) slipped 0.1 per cent as a 3.8 per cent drop in poultry more than offset increases in egg (up 1.1 per cent) and dairy (up 1.4 per cent) receipts. Poultry prices fell for the first time since 2006.

Despite higher crop insurance payments in Western Canada, program payments fell 4.7 per cent to $3.1 billion. In 2010, eight provinces posted decreases, with reduced provincial program payments in Quebec significantly contributing to the overall decline.

Operating expenses

Farm operating expenses fell 4.2 per cent to $34.5 billion, the second consecutive annual decline. Lower fertilizer, feed and pesticides expenses more than offset higher labour and machinery fuel costs.

Fertilizer expenses declined 22.2 per cent in the wake of lower prices throughout most of 2010. Price decreases were also the major factor in an 11.5 per cent drop in pesticide expenses. However, wet spring conditions in Saskatchewan and, to a lesser extent, in Manitoba led to important reductions in seeded areas and to the reduced use of both of these inputs.

Commercial feed expenses fell 8.5 per cent. Feed prices, as well as cattle and hog inventories, were lower throughout much of 2010. Other factors included a sharp decline in stabilization premiums in Quebec and a 4.9 per cent decrease in interest costs as the period of low interest rates continued in 2010.

Operating expenses fell in all provinces, the largest decrease, 9.5 per cent, occurring in Saskatchewan.

When depreciation is included, total farm expenses fell 3.7 per cent to $40 billion in 2010.

Total net income

Total net income amounted to $2.7 billion in 2010, up $131 million from 2009. The negative impact of falling inventories offset much of the increase in realized net income. Total net income increased in all provinces except Manitoba and Saskatchewan.

Total net income adjusts realized net income for changes in farmer-owned inventories of crops and livestock. It represents the return to owner’s equity, unpaid labour, and management and risk.

Production losses resulting from reduced seeded acreage in Saskatchewan and Manitoba had a negative impact on on-farm stocks of grains and oilseeds. These lower stocks, combined with the continuing decline in cattle inventories, reduced the value of inventories by $1.7 billion.

Net value added

Agriculture’s net value added rose by $94 million to $11 billion in 2010. A decrease of $1.4 billion in expenses on inputs outweighed a decline of $1.3 billion in the total value of production. Only two provinces, Saskatchewan and Manitoba, recorded decreases in net value added.

“Net value added” measures agriculture’s contribution to the national economy’s production of goods and services. It is derived by calculating the total value of agricultural sector production, including program payments, and subtracting the related costs of production (expenses on inputs, business taxes and depreciation).

Can vary widely

Statistics Canada first releases preliminary farm income data for the previous calendar year in May of each year (five months after the reference period). Revised data are then released in November of each year, incorporating data received too late to be included in the first release.

Realized net income can vary widely from farm to farm because of several factors, including commodities, prices, weather and economies of scale. This and other aggregate measures of farm income are calculated on a provincial basis employing the same concepts used in measuring the performance of the overall Canadian economy. They are a measure of farm business income, not farm household income.

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