Canadian Farm Incomes Sinking

OTTAWA - May 25/10 - SNS -- Gross revenue from farming operations in Canada sank 12.3% below last year during the first quarter to an estimated $10.5 billion, according to Statistics Canada.

Farm cash receipts or gross revenue, which include crop and livestock revenues plus program payments, declined in every province. The biggest decline occurred in Alberta, where receipts fell 17.3%.

Market receipts from the sale of crops and livestock amounted to $9.8 billion, down 11.9% from the first quarter of 2009. Crop receipts fell 17.4% to $5.3 billion, the first decrease since 2006, while livestock receipts declined 4.4% to $4.5 billion.

The decrease in crop receipts was due primarily to lower prices for the major grains and oilseeds, coupled with reduced sales of canola, soybeans and corn. The slide in grain and oilseed prices has persisted since they peaked in 2008, as world grain and oilseed supplies continued to grow.

As prices continued to decline, producers chose to receive payment for more of their grains and oilseed crop in 2009 rather than defer payment into the first quarter of 2010. This was a reversal of the situation in 2008 when prices were stronger. Farmers deferred about $520 million less in receipts into the first quarter of 2010 than they did into the first quarter of 2009.

On the livestock side, both the number of animals sold and the prices received for cattle and hogs were lower. During the first quarter, Canadian farmers exported 9.2% fewer cattle and 18.0% fewer hogs compared with the same quarter in 2009. Livestock receipts declined in every province, ranging from 0.6% in Prince Edward Island to 11.5% in Saskatchewan.

In the supply-managed sector (dairy, poultry, eggs), farm cash receipts rose 0.9% in the first quarter, as prices for milk and eggs rose. Poultry receipts fell 2.5%. Supply-managed commodities accounted for more than 45% of total livestock receipts.

Program payments amounted to $703.1 million in the first quarter, down 17.9% from the same quarter in 2009. Farmers were required to make their final withdrawals from the Net Income Stabilization Account by the end of the first quarter of 2009. Program payments fell in every province except Manitoba, Nova Scotia and Alberta.

Statistics Canada also reported that gross income from the sale of crops and livestock declined $883 million in 2009 to $40.9 billion for the entire calendar year.

Livestock receipts fell $900 million to $17.9 billion, while crop receipts remained virtually unchanged from 2008 levels and amounted to $23.0 billion.

The 4.8% drop in livestock receipts was due largely to a sharp decline in the number of animals exported as the Country of Origin Labeling legislation came into effect in the United States. Another factor was lower demand for livestock products resulting from the global recession. The number of cattle (-33.3%) and hogs (-31.7%) shipped across the border in 2009 were down from 2008 levels.

While slaughter cattle prices were relatively stable, slaughter hog prices resumed their decline after increasing slightly in 2008. In 2009, slaughter hog prices fell 4.7%. Since 2004, they have declined by 28.8%.

A 1.6% rise in receipts in the supply-managed sector (dairy, poultry and eggs) cushioned the decline in livestock receipts.

The slight rise in crop receipts in 2009 (+0.1%) followed increases of 24.7% in 2008 and 25.4% in 2007.

Realized net farm income amounted to $3.6 billion in 2009, down $10 million (-0.3%) from 2008, as both receipts and operating costs declined. Realized net farm income is the difference between a farmer's cash receipts and operating expenses, minus depreciation plus income in kind.

The slight drop in 2009 followed increases in both 2007 and 2008.

Realized net income fell in four provinces: Nova Scotia, Quebec, Ontario and Alberta. In all four, declines in receipts exceeded declines in expenses. Realized net income increased in the remaining provinces.

Nationally, farmers last year paid roughly 80 cents in operating expenses for every $1 in receipts they earned, down from 81 cents in 2008. During the past decade, this expenses-to-receipts ratio has fluctuated between about 78 cents in 2001 and 85 cents in 2003. (The ratio is calculated by dividing operating expenses by total farm cash receipts.)

When depreciation charges are taken into account, the 2009 ratio rises to 92 cents for every $1 of receipts.

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