Realized net farm income — the difference between a farmer’s cash receipts and operating expenses minus depreciation, plus income in kind — amounted to $3.3 billion in 2008, up $1.3 billion (63.2 per cent) from 2007, Statistics Canada reported Monday.

This was the second consecutive annual increase after declines in 2005 and 2006, the federal statistical agency said.

Realized net farm income decreased in Newfoundland and Labrador, Prince Edward Island, Nova Scotia and Manitoba, where large increases in operating costs outpaced gains in receipts. The remaining provinces all showed increases over 2007 levels.

Crop producers continued to benefit from higher grain and oilseed prices through the first part of 2008, more than offsetting large increases in operating costs.

Meanwhile, many livestock producers were adversely affected by higher feed costs and reduced prices resulting from the strong Canadian dollar vis-a-vis its American counterpart in the first part of the year, as well as uncertainty over the country-of-origin labelling (COOL) law in the U.S.

Farm cash receipts

Market receipts (revenues from the sale of crops and livestock) increased 14.1 per cent to $41.8 billion in 2008. Crop receipts increased 25.2 per cent, mainly as a result of higher prices, while livestock receipts rose 2.9 per cent.

Grain and oilseed prices began to climb in the fall of 2006 and peaked in mid-2008, the result of strong global demand and tight supplies. Since then, prices have fallen in the wake of rising stocks and the impact of the financial crisis and the economic downturn on the global demand for commodities.

In the livestock sector, revenue from hogs declined 2.9 per cent, the fourth consecutive annual decrease. Both prices and the number of head sold fell in 2008. Market receipts for cattle and calves increased 2.4 per cent in 2008, as more cattle were exported into the U.S.; exports were up 13.6 per cent over 2007.

Supply-managed commodities (dairy, poultry and eggs) showed a 5.7 per cent increase in receipts, as rises in production costs pushed prices higher.

Total farm cash receipts, which include both market receipts and program payments, rose in all provinces in 2008. The largest increases occurred in Saskatchewan (22. per cent) and Alberta (15.5 per cent).

Farm expenses

Producers saw their operating costs increase 11.1 per cent to $37.5 billion in 2008, as fertilizer and fuel prices soared. This was the strongest annual rate of growth in expenses since 1981.

Over half of the increase was attributable to increases in fertilizer and machinery fuel expenses. Higher grain prices resulted in higher feed costs for the livestock sector as feed expenses rose 15.1 per cent.

Expenses rose in all provinces in 2008. The largest increases occurred in the Prairie provinces.

Total net income

Total net income amounted to $6.1 billion in 2008, up $5.1 billion from 2007, despite declines in six provinces. Net income increased in Ontario, Manitoba, Saskatchewan and Alberta.

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, management and risk.

An increase in the farmer-owned inventories of crops was the primary factor behind the rise in total net income, as inventories of cattle and hogs declined.

The value of inventory change was $2.8 billion in 2008, as record yields for many crops boosted production in Ontario and the Prairie provinces. Year-end stocks of canola, dry peas and oats were at record highs in 2008, while stocks of most other grains and oilseeds also increased.

Net value added

Agriculture’s net value added rose $5.4 billion to $14.9 billion in 2008. The main contributors were higher grain and oilseed prices and strong crop production.

Net value added measures agriculture’s annual 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).

Farm cash receipts: First quarter, 2009

Market receipts for Canadian farmers from the sale of crops and livestock during the first quarter of 2009 totalled $11 billion, up 7.5 per cent from the first quarter of 2008.

Receipts for crop producers rose 7.8 per cent, with large increases in potato, soybean and canola receipts. Potato prices were 52.5 per cent higher in the first quarter of 2009 than they were in the same quarter last year, as a result of a lower fall harvest in North America. The quantity of soybean sold increased 26.1 per cent while canola sales were up 25.6 per cent.

Receipts for livestock producers increased 7.1 per cent. Lower feed grain prices and a depreciating Canadian dollar relative to its American counterpart helped support higher cattle and hog prices. Farm cash receipts for hogs increased 27.2 per cent from the first quarter of 2008, when hog prices were at their most recent low.

The supply-managed sector recorded a 2.4 per cent increase in farm cash receipts as prices for milk, poultry and eggs rose. Supply-managed commodities accounted for 43 per cent of total livestock receipts.

Program payments amounted to $870 million in the first quarter of 2009, down 32.6 per cent. This, in part, was the result of the phasing out of the Canadian Agriculture Income Stabilization (CAIS) program and favourable crop sector returns.

Total farm cash receipts, including crop and livestock revenues plus program payments, amounted to $11.9 billion during the first quarter of 2009.

The strongest gains in farm cash receipts were in Prince Edward Island and New Brunswick, where potatoes contribute substantially to receipts. Ontario (down 1.1 per cent) and Newfoundland and Labrador (down 0.5 per cent) were the only provinces in which farm cash receipts declined from the first quarter of 2008 to the first quarter of 2009.

Notes: Farm cash receipts measure gross revenue for farm businesses. They do not represent their bottom line, as farmers have to pay their expenses and loans and cover depreciation. Preliminary information on net farm income for 2009 will be available in May 2010.

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.

Financial data for 2008 collected at the individual farm business level using surveys and other administrative sources, will be available later in 2009. These data will help explain differences in performance of various types and sizes of farms.