Canadian farms’ net, gross, expenses all rise in 2011

An increase of nearly 12 per cent in farm cash receipts in 2011 over 2010, against an 8.4 per cent rise in farm operating expenses, helped lead to a year-over-year increase of over 50 per cent in Canadian farmers’ realized net income, according to Statistics Canada.

Realized net income for Canadian farmers amounted to $5.7 billion in 2011, a 53.1 per cent increase from 2010. This rise followed a 19 per cent increase in 2010 and a 19.6 per cent decline in 2009, the federal statistics agency said in a report Monday.

Realized net income — the difference between a farmer’s cash receipts and operating expenses, minus depreciation, plus income in kind — fell in four provinces: Newfoundland and Labrador, Nova Scotia, Manitoba and British Columbia. In each, increases in costs outpaced gains in receipts.

Farm cash receipts

Farm cash receipts, which include market receipts from crop and livestock sales as well as program payments, rose 11.9 per cent to $49.8 billion in 2011. This was the first increase since 2008.

Market receipts alone increased 12 per cent to $46.3 billion. Crop receipts, which increased 15.8 per cent to $25.9 billion, contributed the most to the increase. Sales from livestock products rose 7.5 per cent to $20.3 billion, the largest annual increase since 2005.

Stronger prices for grains and oilseeds played a major role in the increase in crop revenues. For example, canola receipts increased 37.3 per cent in 2011 on the strength of a 27.3 per cent gain in prices.

Grains and oilseed prices started rising in the last half of 2010 as a result of limited global stocks and strong demand. Even though prices peaked in mid-2011, prices for the year, on average, remained well above 2010 levels.

Crop receipts rose in every province except Manitoba and Newfoundland and Labrador. In Manitoba, difficult growing conditions reduced marketings of most grains and oilseeds.

In Prince Edward Island and New Brunswick, increases in potato prices and marketings helped push crop receipts higher.

It was also stronger prices that were behind the rise in livestock receipts. Hog receipts increased 15.5 per cent to $3.9 billion on the strength of a 14.7 per cent price increase. Cattle prices rose 19.5 per cent in 2011, while receipts increased 1.1 per cent because of a reduced supply of market animals.

Hog, cattle and calf prices increased in 2010. The upward trend continued throughout most of 2011, primarily because of low North American inventories and high feed grain costs.

Receipts for producers in the three supply-managed sectors — dairy, poultry and eggs — increased 7.9 per cent as rising prices reflected higher costs for feed grain and other production inputs. A 14.9 per cent rise in chicken receipts exceeded increases for eggs (+8.7 per cent) and dairy products (+5.3 per cent).

Program payments increased 11.2 per cent to $3.5 billion in 2011. Increases in Quebec provincial stabilization payments as well as crop insurance payments in Manitoba and Saskatchewan accounted for much of the rise.

Farm expenses

Farm operating expenses (after rebates) were up 8.4 per cent to $38.3 billion in 2011, the second-largest percentage increase since 1981. This increase followed two consecutive years of modest declines.

Higher prices for fertilizer, feed and machinery fuel contributed to the increase in operating expenses.

According to StatsCan’s Farm Input Price Index, both fertilizer and machinery fuel prices were up by over 25 per cent in 2011. At the same time, feed grain prices increased by more than 30 per cent.

When depreciation charges were included, total farm expenses increased 8.2 per cent to $44.1 billion. Depreciation costs rose 6.9 per cent.

Total farm expenses advanced in every province in 2011. The largest percentage increases occurred in Saskatchewan (+12.3 per cent), Quebec (+9.5 per cent) and Alberta (+9.0 per cent).

Total net income

Total net income reached $5.8 billion, a $3.3 billion gain. There were large increases in Saskatchewan (+$2.1 billion), Alberta (+$567 million) and Ontario (+$470 million), while Newfoundland and Labrador, New Brunswick and Manitoba saw declines.

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.

The total value of farm-owned inventories rose by $165 million in 2011. A strong increase in deferred grain payments together with the first increase in cattle inventories since 2004 contributed to the rise.

Note to readers: 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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