My perspective - Seeing green? Or red?
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- Published on Friday, June 7, 2019
By Kate Jackman-Atkinson
Neepawa Banner & Press
If things seem a little tighter on the farm, it’s with good reason. Late last month, Statistics Canada released their report of 2018 farm income and while most people were expecting a drop, the magnitude of that drop came as a big surprise.
When the income and expenses were tallied, Stats Can found that in 2018, the realized net farm income of Canadian agricultural producers fell to $3.9 billion, a 45.1 per cent decrease from 2017. This was the largest decrease since 2006. Realized net income is the difference between a farmer’s cash receipts and operating expenses, minus depreciation, plus income in kind. Total net farm income, which includes an income adjustment for inventories of crops and livestock owned by farmers, also saw a decline. This measure fell from $8.2 billion, to $3 billion.
Stats Can found that realized net income fell in every province except New Brunswick, which saw increased receipts from cannabis and potatoes. The biggest loss was felt in Alberta– a 68.1 per cent decline. In Manitoba, realized net income fell from $1 billion in 2017 to $715 million in 2018.
Declining farm income is an issue of great concern for rural communities, which are heavily dependant upon on agriculture. Even those who don’t earn their living from farming rely on the sector. Farmers buy equipment; vehicles and fuel; feed and crop inputs. Be it food processing or industrial manufacturing, much of rural industry revolves around the agricultural sector. Not only that, farmers also buy meals, groceries, clothes and food. What’s happening in the farm sector has big implications for rural communities as a whole.
What’s behind the decline? Is this a one-off? Or part of a trend?
Net income is influenced by income and expenses and the decline was almost entirely related to rising expenses. Over all, crop revenues registered a slight gain, with cannabis and wheat (excluding durum) recording the largest gains. On the flip side, prairie staples of canola, lentils and dried peas saw lower revenue, from a combination of rail disputes, late harvest, lower production and higher duties in the countries that buy these products.
Regardless of the sector in which they operated, farmers across Canada saw an increase in operating expenses, which rose by 6.5 per cent, the largest percentage increase since 2012.
While livestock producers had a mixed bag on the income side– hog income fell, supply managed income rose and cattle income held steady– feed costs were up just under 10 per cent. This was mostly due to tight supplies. Farmers were also hit by rising interest expenses, due to higher interest rates and farmers carrying more debt. This was the largest increase in interest expense since 1981, though fortunately, today, it is still a relatively small portion of operating expenses. Fuel prices were up 18 per cent, which followed a 9 per cent increase in 2017.
On the total net farm income side, agricultural producers held lower stocks of barley, corn, wheat (excluding durum) and soybeans, as well as fewer cattle and calves.
Farming is a cyclical industry and most farmers operate knowing this is the case. The big question will be, what happens this year? As a country reliant on an export market for our agricultural products, ongoing trade disputes could see lower revenues in 2019. Will drought continue, exacerbating the feed shortage experienced last year and cause livestock producers to further reduce their inventories or face higher expenses? How much will rising fuel costs impact net income? How much will producers be able to increase their revenues by moving to more profitable crops, including the now-legal cannabis? These are questions of great importance to rural communities, especially as two elections loom.
