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Farm cash receipts at new high: StatsCan

Market cash receipts for farmers hit a record high in 2007, boosted primarily by a surge in grain and oilseed prices, Statistics Canada reported Monday.

Dairy, poultry and egg producers received higher revenues. Meanwhile, cattle and hog farmers were squeezed by a combination of lower prices, higher feed costs, and the higher Canadian dollar.

Canadian farmers received a record $36.3 billion from the sale of crops and livestock in 2007, up 12.2 per cent from 2006. This total was 14.9 per cent above the previous five-year average. This period included the bovine spongiform encephalopathy (BSE) situation and some years of low commodity prices.

Receipts from crop sales hit a record $18.1 billion, up 25 per cent over 2006 and 29.1 per cent higher than the previous five-year average. Although grain and oilseed prices were the driving force for the increase, deliveries were strong as a result of producers drawing on their stocks to benefit from the high prices.

Livestock receipts grew 1.7 per cent to $18.1 billion, the result of higher dairy and poultry prices and increased marketings. Cattle and hog revenues declined in the wake of lower prices, while exports of live animals to the United States climbed as the economics of feeding these animals supported this movement. Livestock revenues were 3.5 per cent above the previous five-year average.

Program payments amounted to $4.1 billion, a 9.7 per cent decline from 2006 and 9.5 per cent below the previous five-year average. This was due in part to improved prices in the grains and oilseeds sector.

Total farm cash receipts, which include crop and livestock revenues plus program payments, reached a record $40.4 billion in 2007. This level was 9.5 per cent above 2006 and 11.8 per cent higher than the five-year average. It was the first time that receipts surpassed the $40 billion mark.

Farm cash receipts increased in all provinces except Prince Edward Island and New Brunswick — where they declined by 3.4 and 2.9 per cent, respectively — and in Nova Scotia and British Columbia, where they remained relatively stable, rising just 1.3 and 1.2 per cent respectively. Gains ranged from 3.9 per cent in Ontario to 18 per cent in Manitoba.

Noting Saskatchewan’s farm cash receipts rose 15 per cent over 2006 levels to $7.6 billion, provincial Agriculture Minister Bob Bjornerud said in a separate release Monday that grain prices are driving a positive trend in agriculture.

“The 39 per cent increase in crop receipts is great news,” Bjornerud said. “Wheat receipts were up by $390 million over 2006, durum by $306 million and canola by $287 million.”

However, he said, “we cannot forget that farm income is still being affected by increased operating expenses and the high value of the Canadian dollar… Our livestock sector remains under pressure from low prices and high input costs — cash receipts fell in that area.”

First economic indicator

Farm cash receipts are the first economic indicator available from Statistics Canada for the agriculture sector. They measure gross revenue for farm businesses only. They do not represent farmers’ bottom line, as farmers have to pay their expenses, loans, and cover depreciation. Statistics Canada is scheduled to publish preliminary estimates of net farm income for 2007 on May 26.

While prices for grain and oilseed producers rose substantially in 2007 from low levels, inputs also increased. For example, the Industrial Product Price Index indicated that Canadian fertilizer prices rose 20.8 per cent in 2007. In addition, livestock producers faced much higher feed costs. For instance, feed barley prices were 63 per cent higher than in 2006.

Both farm cash receipts and operating expenses can vary widely from farm to farm because of several factors, including commodities, prices, weather and economies of scale.

In addition, a rapidly appreciating Canadian dollar against the US dollar has the impact of lowering returns to Canadian producers who depend heavily on international sales. The value of the Canadian dollar increased by more than 17 per cent against its American counterpart during 2007.

High crop prices

Grain and oilseed prices have been increasing since the fall of 2006, boosted by expansion in the biofuel sector. Since that time, weather-related production issues in many of the world’s major producing countries have tightened supplies, pushing prices to levels not seen in recent years.

Revenues from wheat (excluding durum) rose 43.4 per cent to a record $3.2 billion in 2007. Durum receipts climbed to $962 million, up 68.2 per cent from 2006. In both cases, the increase was the result of higher prices and Canadian Wheat Board payments, as marketings were down.

Barley receipts climbed to $793 million in 2007, the highest level since 1997 and an increase of almost 80 per cent over 2006. This rise was supported by record prices and strong deliveries, especially in the fourth quarter, as producers harvested an above-average crop in 2007.

Canola revenues, which accounted for almost one-fifth of the overall crop receipts, hit a record $3.4 billion, up 37.0 per cent from 2006.

Soybean revenues reached a record high of $1 billion, a 49.3 per cent gain from 2006. This surge was the result of a 25.7 per cent rise in prices and 18.7 per cent higher deliveries.

The increasing use of corn in ethanol production drove prices 29.7 per cent over 2006 levels, while a record crop in 2007 helped boost revenues to a record $1 billion.

Livestock, supply-managed sectors

Supply-managed commodities (dairy, poultry and eggs), which made up 43 per cent of total livestock revenues, were the main force behind the 1.7 per cent increase in livestock receipts in 2007.

Supply-managed revenues reached $7.9 billion, up 8.6 per cent over 2006, the largest increase in the last 10 years.

Receipts for cattle and hog producers were adversely affected by the combination of reduced prices resulting from the appreciation of the Canadian dollar and higher feed costs. With more animals shipped south of the border for cheaper feeding, domestic slaughter decreased.

Cattle and calf revenues decreased 2.8 per cent to $6.2 billion in 2007, as both prices and marketings declined. Despite higher receipts from the export of live animals, lower domestic slaughter and interprovincial trade pulled down overall cattle and calf receipts.

Receipts from cattle and calf slaughter, which accounted for almost two-thirds of the total, fell six per cent, largely the result of reduced marketings. Revenues from interprovincial trade declined 20.9 per cent as both marketings and prices fell. The dramatic rise in feed costs put downward pressure on feeder cattle prices.

Exports of live cattle and calf to the U.S. have been rising rapidly since the border was reopened in July 2005. Exports jumped over 35 per cent in 2007 to 1.4 million head. Even so, exports remained well below the pre-BSE level of 1.7 million head in 2002.

Hog receipts fell 2.5 per cent in 2007 to $3.3 billion, the result of lower prices. Marketings were up 1.0 per cent. Prices were pressured mainly by a rising Canadian dollar, higher feed costs and ample supplies. Slaughter hog receipts, which accounted for about 80 per cent of total hog revenues, fell 5.4 per cent to $2.6 billion as both prices and marketings declined.

Farmers continued to export hogs to the United States at a record pace. Exports amounted to 9.9 million animals during 2007, surpassing the previous record set in 2006.

Program payments

The decrease in program payments can be primarily attributed to the phasing-out of the Grains and Oilseeds Payment Program. As a new program in 2006, it delivered $747 million over the course of the year. However, in 2007, it delivered only $7 million as it wound down.

Payments under the Canadian Agricultural Income Stabilization program (CAIS) and CAIS-related programs declined 10.1 per cent to $1.7 billion in 2007.

Cushioning the decrease, payments made under the Cost of Production Payment totalled $319 million. Provincial stabilization and crop insurance payments, to which producers contribute through premiums, both increased. Stabilization payments rose largely because of higher payouts made to hog producers in Quebec.

(With files by FBC staff)

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