For those farmers who had higher crop returns or have experienced an especially good year, Dec. 31 is the deadline to take advantage of farm tax deferral strategies that can help manage extra income.

Tom Blonde, partner at Baker Tilly GWD, said that most farm businesses have plenty of tax deferral advantages to choose from. The key is to be strategic.

“Each year, most farm businesses can choose to take deductions or defer them to the next year, impacting how much tax and the rate they pay,” said Blonde. “This allows the business to manage fluctuations in income year over year, and in years when income is lower, you can defer deductions on things like capital expenses, equipment, tile drainage, etc. This strategy means you can minimize taxes payable during a higher income year by saving those deferrals in lower income years when you really need them.”

Farm businesses could find themselves paying a higher amount of tax using this ‘prepay’ strategy in the short-term in a lower income year, but tax deferrals can be claimed instead in higher income years where more tax could be saved.

[RELATED] Farmers cash in on interest-free loans

For example, this could benefit someone who has an inventory of high-value grain that can be optionally claimed as income in 2022 and therefore mean less income would need to be reported in 2023.

“You’re paying more tax today to give you the potential to save even more tax in the following year,” said Blonde.

This strategy can be especially helpful to unincorporated farms. Sole proprietorships or partnerships are subject to a considerable increase in marginal tax rates after the $46,000 income mark per person (jumping from 20 per cent to almost 30 per cent and higher as income increases). Most incorporated farms have a more stable flat rate of 12.2 per cent on the first $500,000 in income, increasing to 25 or 26.5 per cent after that.

“It’s much more critical for unincorporated farms to strategically plan their tax deferrals to avoid significant taxes down the road,” said Blonde.

For unincorporated farms who find themselves with some extra income, Blonde recommends making tax decisions strategically to target a lower income bracket, especially if increased income is expected the following year, when you expect to sell your high-value grain inventory, for example.

Choosing not to take the writeoffs on equipment depreciation or the new shed you built this year could pay off for you next year. And while this strategy may cause an increase in tax rates in the short term, the idea is that it should pay off in future years, especially if you predict a continuation of higher income.

Other strategies to reduce tax rates are to keep other sources of personal income low as much as possible, since personal income is combined with personal farm income for tax purposes in unincorporated structures.

Blonde also said that, if seriously concerned about tax rates this year, consider incorporating the farm. “There’s still time to make business decisions that can set you up for financial and tax planning success,” he said, noting the year-end deadline.

If you find yourself with more after-tax cash and don’t need the funds to invest in additional farming assets, you could use the extra cash to pay down the principle on farm debt to guarantee an additional after-tax rate of return. This strategy can be especially helpful as interest rates continue to rise.

“Paying down debt is like insurance against future interest rate hikes,” Blonde said.

Strategies for all farms

No matter the farm structure, there are a few strategies that can help safeguard against taxation. The trick is to employ them before Dec. 31.

The first is to share a little extra in wages. If a farm employs family, consider paying higher wages or a year-end bonus. This year it’s easy to justify the increase with rising inflation and labour shortages, but Blonde reminds farmers to be reasonable in the extra payout.

Investing in the farm is another strategy that can pay off in years to come. Upgrading equipment, investing in tile drainage or building new farm buildings can all be used as tax deductions whenever you choose to use them.

Blonde reminds farmers to plan these investments carefully, especially in the current environment where farm equipment and building supplies can be at a premium due to supply chain and labour disruptions as a result of the pandemic.

Of course, if you’ve left tax planning too late, or haven’t had time to properly research all the business structure and tax advantage options, RRSP contributions are always an option. And you’ve got a little extra time to plan since RRSP contribution deadlines aren’t until March 1, 2023.

“This also works for farms that have exhausted all their other tax reduction options, or have invested as much as they can into the farm. A personal RRSP investment can always help with tax strategies, and it’s a great way to invest in a non-farm asset,” says Blonde.

As always, it’s important for farmers to consult with their accountants and financial advisors to determine where they are in the tax arena and what options are available, including carry forward deferrals.

“Finding yourself in the position of having extra income is a nice problem to have,” says Blonde. “Every farm is different and requires their own tax strategies, so be sure to consult your own advisor to find the best advantage for your farm business.”

The post Year-end tax advice you don’t want to ignore appeared first on Manitoba Co-operator.

“The amount of the advances have [increased] significantly,” said Randy Ozunko, who manages the program for the Manitoba Pork Council.

The APP is federally funded and administered by producer groups. It offers up to $1 million in operating loans, with a portion of that loan offered interest free.

Advances are repaid as farmers sell their production, with up to 18 months allowed to fully repay the advance for most commodities, and up to 24 months for cattle and bison.

This summer, the federal government increased the interest free portion to $250,000 from $100,000. The $250,000 interest-free portion will stay in place throughout the 2022 and 2023 program years.

As of Dec. 7, Manitoba Pork had advanced just over $16 million to 52 producers and Ozunko said there was at least one more application pending. Of that, nearly $12 million has been interest-free advances and about $4.4 million has been interest-bearing.

[RELATED] Take advantage of cash advances

Last year, 51 producers took out about $12.2 million in advances, with nearly $5 million in interest-free advances and $7.3 million in interest-bearing loans.

The Manitoba Crop Alliance has also seen an increase in dollars issued to clients, said chief operating officer Darcelle Graham, and roughly the same number of clients as last year.

In other areas of the country, administrators are seeing an uptick in applications.

The Canadian Canola Growers Association, one of 30 administrators of the program, has received about 8,000 applications so far this year, roughly 1,000 more than last year at this time, the farm group’s director of finance and operations said on Nov. 21.

The size of loans has also gone up, said Dave Gallant.

“Last year the average advance was $187,000,” he said. “This year, before the [interest] announcement, it was at $230,000. Today it’s hovering around $256,000.”

[RELATED] Alberta Farmer Express: Many farmers – but not all – are cashing in on interest-free loans

The increase in applications has been even higher at FarmCash, a division of Alberta Wheat.

About $60 million has been loaned to 319 producers so far this year, putting FarmCash on track to double last year’s total loans of $37 million to 196 producers.

“During this time of high interest rates, it’s becoming more imperative for producers to use low-interest financing tools,” said Syeda Khurram, chief operating officer of FarmCash.

“This is really helping them improve their bottom lines and giving them access to more cash flow to help them recover from last year’s drought and ongoing inflation.”

“Consider how much our input prices have increased,” said Jason Lenz, a grain producer near Bentley, Alta. “There is probably no better time to apply than now because this year’s crop was by far the most expensive crop we’ve ever grown as far as putting dollars into the ground.

“Having this program just gives you so much flexibility. I can buy my inputs for the next year at the right time or take advantage of some of the price opportunities that always happen in the fall,” he added.

Although the interest-free portion of the loan was increased to help producers fight the rising costs of fuel, fertilizer and seed, it can be used for virtually anything, Khurram said.

“As long as you’re an agricultural producer, you can apply for up to $1 million, and as long as you meet the criteria of payment timelines, you can use it wherever you want to.

“The federal government is not asking producers to do a report on where the advance is being used, so it could be anywhere on their farming operations.”

When it raised the interest-free portion in June, the government estimated borrowers would save an average of $5,500 in interest.

“One family was able to go on holiday just because they saved money through this financing tool,” said Khurram.

The prime rate has gone up since then. It was 3.7 per cent in June and has since risen to 5.95 per cent, with a further hike announced last week. When it upped the interest-free portion in June, the government also estimated it would cost $61 million over two years.

Applying for a cash advance is simple, said Lenz, noting he received his loan three days after submitting his application.

“It’s just so easy to do. Having those loan dollars in place allows me to sell my grain when I want to rather than when I need to. It’s saying that I can maybe wait for better pricing opportunities other than needing to sell to create some cash flow for my farm.”

Additional security is required for advances on products that are either in production or non-storable, as well as for loans where the security is animals or animal products. This can include potential proceeds from a risk management program such as AgriInsurance or AgriStability.

Because the advance is considered a loan, it is not considered income for tax purposes.

The program distributed $2.4 billion in advances last year to 17,430 producers across the country.

A list of cash advance administrators, as well as their administration fees and rates on the interest-bearing portion of the loans, can be found at the Government of Canada website.

The post Farmers cash in on interest-free loans appeared first on Manitoba Co-operator.

In ABARES’s June report, it noted that average to above-average rainfall has greatly assisted Australia’s main winter crops of wheat, barley, canola and chickpeas. However, the report said Queensland and Western Australia didn’t receive enough rain in May and planting intentions weren’t fully met in those states.

Total winter crop production in 2020-21 was forecast to jump 53.0 per cent compared to the previous year, for 44.52 million tonnes. In the last decade, only two other years provided more production, 45.67 million tonnes in 2011-12 and 56.68 million tonnes in 2016-17, which was the year prior to the drought.

Wheat, the country’s largest crop, is expected to see its production jump by almost 76.0 per cent to 26.67 million tonnes in 2020-21, according to ABARES. Barley production is set to rise by 17.3 per cent to 10.56 million tonnes.

Canola production is forecast to vault 39.5 per cent to 3.25 million tonnes, while oat production is to leap 86.0 per cent to 1.6 million tonnes. Also Australia has forecast chickpea production to skyrocket by 135.2 per cent in 2020 to 661,000 tonnes.

In terms of area, ABARES estimated a 23.0 per cent increase overall to 22.48 million hectares in 2020-21. Western Australia leads the way at 8.32 million hectares for a gain of 4.9 per cent from the previous year. New South Wales was forecast to have 5.87 million hectares planted, up 90.4 per cent. It’s followed by South Australia with 3.56 million hectares, up 2.8 per cent, and 3.37 million in Victoria for an increase of 8.7 per cent. Queensland was to have a 103.3 per cent jump in area to 1.34 million hectares.

The post Australian crop production set to skyrocket in 2020-21 appeared first on Manitoba Co-operator.

For CN Rail May marked the third monthly record in a row having shipped 2.5 million tonnes of grain up from 2.4 million in May 2014, it said in a news release June 1.

CP Rail moved 2.8 million tonnes of grain in May, beating its previous record set in May 2014 by more than 300,000 tonnes, it said in a news release.

“CP has moved 7.3 per cent more grain and grain products this crop year as compared to last crop year, and 10 per cent more than the three-year average,” the release said.

CN grain shipping so far this crop year, which began Aug. 1, 2019 and ends July 31, is 20 per cent above the three-year average.

“These unprecedented results come after record movements in March and April, where CN moved 2.62 million tonnes and 2.73 million tonnes, respectively from Western Canada,” CN said. “So far, during the 2019-20 crop year, CN has moved 23.3 million tonnes of western Canadian grain.”

As of May 31 CP had moved 24.17 million tonnes of grain during the current crop year.

CP said it spotted more than 6,000 cars each week in the late-April and early-May grain shipping weeks 39, 40 and 41, exceeding CP’s plan to ship 5,700 cars a week.

Both railways credited millions of dollars of investment in new, larger-capacity rail cars, locomotives and track. But reduced demand to ship other goods has given the railways more shipping capacity for grain, grain monitor Mark Hemmes of Quorum Corporation said in an interview June 3.

It’s too soon to say if the railways will ship a record volume of grain by the end of the crop year July 31, Hemmes said.

The current shipping record of 54.307 million tonnes was set last crop year.

Both railways noted the demand to ship grain has declined, as it always does this time of year, because farmers are busy seeding.

Both railways struggled to meet grain shippers’ demands earlier in the crop year due to derailments, avalanches and protesters’ blockades.

Grain companies want to ship most of their grain between October and March because that’s when world grain prices are usually the best. But traditionally during the winter rail capacity declines, in part, because of harsher operating conditions.

The post Record grain movement in May appeared first on Manitoba Co-operator.

While the general inflation rate sits at -0.2 per cent, the food inflation rate is at 3.4 per cent. In December 2019, Canada’s Food Price Report forecasted a food inflation rate of about four per cent for 2020, and this is very much where this year is heading toward.

But COVID-19’s economic shock will likely be long lasting and will affect grocery shoppers’ pocketbooks for quite some time.

In Canada, inflation has not been an issue for the past decade. It came close to four per cent in 2011 and that is about it. Not much excitement there. We have seen some decoupling between the general and food inflation before, but nothing like this. Food prices are increasing almost four times more rapidly than the price of any other durable goods in the economy. Now, the Consumer Price Index is not reflecting the actual costs households are facing due to lockdowns. We are all consuming differently. Still, the difference between the two is huge.

In March, the initial shock wave was real rather than financial, and it impacted industry and the rest of the economy directly. Food service, a sector which generates more than $90 billion of revenues a year in Canada, essentially disappeared almost overnight. Lockdowns forced the entire food industry to adjust quickly to a change in our economy.

That shock was swiftly transmitted to the demand side, as households were hit by layoffs and lower incomes. Financial markets were then hit hard by the uncertainty, not knowing when the pandemic and lockdowns would end, unlike other recessions where a slowdown is triggered by a shift in demand which leads to subsequent market pressures to cut supply. That is what our textbooks tell us.

COVID-19 is essentially a one-two punch to the system; whereas, both sides of the economy, supply and demand, were hit hard. There is no textbook for that. The recovery’s sequence is hard to predict, with more than eight million Canadians who have applied for the Canadian Emergency Recovery Benefit (CERB).

Once confinement measures loosen up and Canadians can go out, shop, visit restaurants and do other normal activities to support the economy, the question is whether Canadians will show up. If lingering fears of contagion and of a possible second wave and uncertainty about household incomes prevail, the likely outcome is deflation or at least a price drop for most things.

‘Deflation’ is likely the scariest word for any economist. It is like cancer to an economy. It’s hard to end deflation and grow an economy when consumers know that what they want to buy today will be cheaper tomorrow. That could impact clothing, cars, houses, you name it. Taxes will go up, putting more pressure on consumer demand. So economically, let us hope Canadians do their part when allowed.

Food though will likely buck the deflationary trend for an extended period. Unlike what many analysts have often said, the food sector is not recession-proof as consumers will either trade down or will not go out as much. But with COVID-19, nobody has been going out to restaurants, and consumers have not really celebrated their lockdowns over caviar either. Most of us went back to basics, cooking, baking and making bread. Consumer demand has now a COVID-19 benchmark. Deflation or not, we need to eat.

Yet on the supply side, COVID-19 is making everything more expensive to produce, process, distribute, retail, everything. New cleaning protocols, higher salaries, building infrastructure for e-commerce to accommodate consumers who no longer want to physically grocery shop, all will cost more. Plant shutdowns and food safety issues are the last things the food industry needs.

With online shopping being more popular, delivery costs will also need to be covered by consumers, whether we like it or not. Food has always been a high-volume, low-margin business and that is not going to change. For industry, covering the cost to produce and distribute food, and asking consumers to pay more will not change either. COVID-19 is impacting the entire planet, so we cannot import our way out of this scenario either.

As a result, we could see the average Canadian family devote a much greater percentage of their budget on food. Pre-COVID, roughly nine per cent of our budget was devoted to food. It is one of the lowest percentages in the world. That could rise to 11 per cent or even 12 per cent by 2022. In fact, given lockdowns, that percentage is likely much higher right now. In comparison, Americans are at six per cent or seven per cent, whereas, Europeans will spend about 15 per cent. Their percentage will likely change as well. In 1970, Canadian households were spending 21 per cent of their budgets on food. So, in a sense, we are going back in time.

Simply put, current food economics are overwhelmingly forcing us to revisit the social contract we have with food, perhaps for the betterment of society. Valuing food has only positive socio-economic implications. Current food economics are making us more attuned to what is happening around us food-wise. It is also making us more food literate. Such a shift in food prices is relative to what else is going on in the economy and will leave many behind as food insecurity levels in many parts of our country will soar. Single parents, children, and underprivileged demographic groups, will require more attention as we embark into a new food era.

However, there is a silver lining. Since March, even if food prices have been rising, most households are spending less on food. Each household in Canada is saving approximately $5 a day by just cooking at home and avoiding restaurants. That is roughly more than $345 since the beginning of the pandemic, which far exceeds price hikes shoppers needed to absorb during the same period.

Any way we look at it, COVID-19 will have a long-lasting impact on our relationship with food, and no one is immune to that.

The post Opinion: Better get used to higher food prices appeared first on Manitoba Co-operator.

But the latest farm income figures don’t necessarily back that call, showing, on the whole, Canadian farmers netted more money in 2019 than the year before.

2019 Canadian farm net cash income was $12.95 billion, up six per cent, or $750 million, from $12.2 billion in 2018, Statistics Canada reported last week.

And while net cash farm income fell 11 and five per cent in Manitoba and Saskatchewan, farmers in other provinces saw increases: Alberta (up 21 per cent), Ontario (4.5 per cent), Quebec (25.6 per cent) and British Columbia (27 per cent).

(Net cash income is farm revenue minus cash expenses.)

Why it matters: The federal government pledged $252 million in ad hoc funding to help farmers offset the impact of COVID-19. Farm groups say that’s not enough.

Total Canadian 2019 farm cash receipts were up six per cent to $66 billion.

Some of that increase came from a tripling of cannabis cash receipts to $1.7 billion compared to the year previous.

In addition, government subsidies (direct payments) to Canadian farmers jumped 41 per cent in 2019, up 41 per cent or $900 million to $3.2 billion.

Direct payments to Manitoba farmers were up 42 per cent, or $74.9 million, totalling $254.6 million.

Despite the generally positive farm income data, not all StatsCan’s figures were cause for optimism.

“It’s a mixed story for sure depending on the sector (of agriculture), depending on the province and so forth,” J.P. Gervais, Farm Credit Canada’s vice-president and chief agricultural economist told reporters during a telephone conference May 27.

Interest costs took a big jump.

Canadian and Manitoba farm debt increased by eight and seven per cent to $114.8 billion and $10.5 billion, respectively.

Support calls

Since COVID-19 farm groups have stepped up efforts to get additional aid.

The Canadian Federation of Agriculture (CFA) asked Ottawa for $2.6 billion, warning in an April 16 news release that “(W)ithout immediate assistance from the federal government, the Canadian agriculture sector cannot ensure our domestic food supply will remain secure for the immediate and long-term benefit of all Canadians.”

Much to the chagrin of farm groups Ottawa pledged just $252 million.

And before there’s more aid Agriculture Minister Marie-Claude Bibeau says farmers need to use money already provided through existing programs.

Bibeau either doesn’t understand her role, or hasn’t been able to convince her cabinet colleagues how much financial stress farmers are under, Keystone Agricultural Producers president Bill Campbell said in an interview May 25.

“If you can’t grasp the concept then maybe there’s someone who can,” he said.

But not all farmers agree more aid is needed, especially for Prairie grain farmers.

“Maybe sometime we will, but right now things aren’t that bad,” Kevin Hursh, a Saskatchewan consultant and columnist who farms near Cabri, said in an interview May 27.

Farmers have almost $2.3 billion in their AgriInvest accounts, an official from Bibeau’s office wrote in an email last week.

“Now is the time for producers to use their AgriInvest accounts,” the official wrote. “Account balances vary based on production structure, size and previous account use, but balances can be substantial. For example, a hog farmer has $46,000, on average, in their account while a potato farmer has roughly $93,000 on average.”

Agriculture and Agri-Food Canada has set up an online AgriStability calculator so farmers can estimate how much the program might pay out.

The deadline to sign up for AgriStability has been extended to July, and AgriStability payouts are expected to double to around $700 million, the official wrote.

Cattle and hog producers can apply for some of the $125 million being made available through AgriRecovery.

The Canadian Emergency Business Account (CEBA) has the potential to provide up to $670 million directly to farmers from the forgivable portion of Canadian Emergency Business Account interest-free loans, the official wrote. Recent program changes allow an estimated additional 36,566 farms to access CEBA, for a total of more than 67,000.

Little help

While Campbell credited the federal government for improving CEBA, Bibeau’s call to spend AgriInvest fund only works for those who still have money in the program.

“I know on our farm we have used it,” he said.

“Farmers have been bringing forward their legitimate concerns and she (Bibeau) has not been able to do that job and tell the government that this has to be addressed. So it is frustrating as a producer that when we speak with her that the whole ag concept is not being understood. Bread crumbs being thrown at the industry for somewhat of a survival, not an investment.”

Agriculture has the potential to help restore Canada’s economy as it rebuilds post-COVID, but the government has to invest, Campbell said.

The U.S. government has already budgeted $23.5 billion in ad hoc farm subsidies as part of its $2-trillion COVID aid program, and legislators are working on getting more.

Those subsidies help American farmers and make it harder for Canadian farmers to compete, Campbell said.

“Do you want to bring it all in from the States? Because they are investing in their ag industry,” he said. “Do you want agriculture and rural communities? If you’re not going to support us in times like this then just let us know and we’ll get by, but there ain’t going to be many of us.”

Some farmers probably need government aid, including cattle and hog producers that have seen prices fall as meat-packing plants slowed production or temporarily closed, Hursh said.

Ontario grain farmers, who grow mainly corn and soybeans, both of which have seen price declines — corn because of the drop in ethanol demand in the wake of lower oil prices and soybeans because of a trade dispute with China — might also need help, he said.

“Out here a lot of our costs are down — fertilizer and fuel,” Hursh said. “And many commodities (prices) are as strong or stronger than last year. I don’t see any COVID effect there.”

AgriStability works better than many farmers admit, he said.

Farm income has fallen the past couple of years, but after a number of good years, he said.

“Since 2008 we’ve had a pretty good run, but when you’re in a good run you think it will continue forever and when it drops off from there you think you’ve got a problem,” Hursh said. “It’s not that it’s an easy game. It’s highly capital intensive. The people in the game I think are looking at the potential for a really good year this year. Oftentimes there’s… an overriding issue and this year COVID is there, but grain prices (are steady to higher), grain is moving… I think we should thank our lucky stars in the grain industry and hope the good luck continues.”

Gervais is also optimistic.

“In prices I see a little bit of upside, but not too much,” he said. “If we could get some decent volume that’s where we could see a good year from a crops receipts standpoint.”

After recently sharing his views in the Western Producer, Hursh said for every two emails criticizing his stance, he received five agreeing with him, he said.

The post Farm income up amid calls for more farm aid appeared first on Manitoba Co-operator.

Both cash receipts and operating expenses after rebates for Canadian farmers were up six per cent to $66 billion and $53 billion, respectively, according to Statistics Canada.

One of the biggest increases in expenses was interest, up almost $600 million or 16 per cent totalling $4.2 billion — despite low interest rates.

Farmers only spent more on commercial feed ($7.3 billion), cash wages ($6.6 billion), and fertilizer ($5.7 billion).

Depreciation was an $8-billion expense.

Interest costs exceeded individual spending on pesticides, seed, fuel and cash rent.

“That (interest) for sure has an impact on net cash income,” J.P. Gervais, Farm Credit Canada’s vice-president and chief agricultural economist told reporters during a telephone conference May 27.

Machinery fuel and stabilization premiums were the only expenses that went down in 2019. Farmers spent $2.7 billion on fuel, down five per cent, or $154 million.

Family wages totalling $2.5 billion were up 19 per cent.

“It’s overall expenses I believe that are challenging overall profitability,” Gervais said. “We had tremendous growth all the way up to 2014 and then we have been stagnant in terms of overall cash receipts, and yes, overall operating expenses have continued to grow. That needs to be continually monitored.

“The price of inputs has gone up and businesses are under a lot of pressure to maximize their production. It’s hard for them to cut back on any inputs when they know this is going to have a positive return on their output. Expenses have been going up and that’s what has been challenging profitability for sure.”

Manitoba farmers collectively saw their net cash income fall 11 per cent to $1.3 billion in 2019. While cash receipts of $6.6 billion were unchanged from 2018, operating expenses after rebates rose three per cent, or $171 million to $5.3 billion.

Canadian and Manitoba farm debt increased by eight and seven per cent to $114.8 billion and $10.5 billion, respectively.

While debt can be burdensome when net cash income declines, borrowing to become potentially more profitable makes sense so long as it can be repaid, Gervais said.

Farmers are generally facing tougher times now, he said.

But there are some promising signs, including stronger canola exports and pork exports to China doubled during the first three months of 2020.

Since then cattle and hog farmers have seen prices decline because of reduced packing plant capacity, but over time Gervais expects more normal market conditions.

“I believe in the long-term viability of Canadian ag, I really do,” Gervais said.

The post Despite low rates, farm interest costs ballooned in 2019 appeared first on Manitoba Co-operator.

It was legalized for recreational use in October 2018. In 2019 cannabis cash receipts of $2.3 billion put it fourth behind canola ($8.6 billion), wheat, excluding durum ($5.4 billion), and soybeans ($2.5 billion).

Cannabis narrowly beat grain corn which in 2019 generated cash receipts of $2.2 billion.

Barley and oats were further back at $949.4 million and $634.8 million.

The numbers were reported by Statistic Canada last week.

Cash receipts for canola, wheat and soybeans were down seven, five and 18 per cent from 2018.

Oat and barley receipts were up 13 and 28 per cent from 2018.

Cash receipts from sunflowers, lentils, canary seed, dry peas, and chickpeas were up 18, 23, 30, eight and 32 per cent, respectively.

When looking at cash receipts, it’s important to consider the cannabis effect, J.P. Gervais, Farm Credit Canada’s vice-president and chief agricultural economist, told reporters during a telephone conference May 27.

For example, while total farm cash receipts of $66 billion were up six per cent, it is just a three per cent increase when cannabis is removed, he said.

“It’s less of a positive story, but still a positive story in my mind,” he added.

“It’s an industry that has grown quite significantly.”

Total crop receipts of $36.6 billion were up four per cent, but if cannabis isn’t counted, crop receipts dropped by one per cent, Gervais said.

Livestock receipts were up five per cent, or $1.27 billion, to $26.3 billion, StatsCan’s report shows.

Cattle generated $8.5 billion in cash receipts, up three per cent or $286 million.

Calves generated another $927 million in receipts, up two per cent or $17.4 million.

Milk production resulted in almost $7 billion in cash receipts up five per cent or almost $341 million.

Cash receipts from hogs were up 14 per cent or $475.4 million to $4.6 billion.

In Manitoba, crop receipts of $4 billion, were down four per cent, but still accounted for most of the $6.6 billion in total farm cash receipts.

Total Manitoba livestock receipts of $2.4 billion were up five per cent from 2018.

Much of it — $1.1 billion — came from hog production. Manitoba hog receipts were up nine per cent or $92.3 million.

Calf cash receipts in Manitoba jumped 19 per cent, or $14.4 million to total almost 92 million in 2019.

Milk cash receipts in Manitoba were up six per cent or $17 million totalling $317.3 million.

The post Pot crop receipts obscure farm income figures appeared first on Manitoba Co-operator.

Risk estimates everything we think might happen. Risk is our guess about what the future holds. More precisely, it is the range of things that might happen and how probable each event is.

Uncertainty is all the things we never imagined that could happen. That’s the key difference between risk (what can be estimated) and uncertainty (the things we never anticipate).

Under uncertainty, the range of potential price action becomes much larger than expected. These big moves up or down can happen over days, weeks, months, years or even decades. We’ve certainly seen some of those lately.

A few examples of extreme price moves quickly come to mind and we’ll see that there is a common thread that runs between them. Consider that for over 30 years, gold had been pegged at $35 to the U.S. dollar. Then when the inflationary 1970s took over, gold marched steadily higher for 10 years to over US$600/ounce by 1980. Gold was viewed as the ultimate inflation hedge until that trend came to an end as it dropped to under US$300/ounce by 2000.

Up next, then, we have the case of interest rates. Interest rates over the past 40 years are a great example of the persistence of a long-term trend. Back in the 1980s, the U.S. Federal Reserve pushed short-term central bank Fed Funds rate to 20 per cent (which helped to pop the aforementioned gold and inflation bubble). At the same time, 10-year U.S. Treasury bond yields were at 15 per cent. Since then, they have come all the way down to 0.5 per cent, albeit with some intermittent jumps higher along the way.

Low rates seem to be here to stay especially in this current environment. In fact, long-term history has shown that low rates (well, maybe not this low) are actually the norm, rather than the exception.

Or, how about this? From 1995 up until the technology bubble top in 2000, the NASDAQ stock index moved up at quadruple the annualized rate of the previous decade. This trend that built up over the course of those five years subsequently reversed as the NASDAQ index proceeded to drop 80 per cent over the next two years. At its peak, many investors wanted to believe that these tech and dot-com stocks would just continue to move higher. They were surprised at just how far they fell afterwards.

More recently, there’s bitcoin, which was only a couple of bucks in 2011. Eventually, it moved up to US$20,000 by the end of 2017 before collapsing to around US$3,000 a year later. It then jumped back up to US$14,000 by mid-June 2019 and now sits around US$10,000. Those are some big and incredible price moves.

A shorter-term example is the Swiss franc. For three years between 2012 and 2015, the Swiss franc was pegged to the euro at a rate of around 0.80. The Swiss central bank sold the franc and bought the euro to hold down the franc, effectively tying the two currencies together. Then one day in early 2015 during the European debt crisis, the Swiss central bank stopped buying the euro and discontinued the currency peg. In a matter of hours, the Swiss franc increased almost 50 per cent versus the euro.

Another dramatic price move occurred in hard red spring wheat in 2017. From the beginning of June, as hot dry weather developed across the growing regions, Minneapolis futures started to climb… quickly. Prices increased steadily almost daily, from about US$5.50/bushel all the way up to around US$8.50/bushel by the beginning of July. By fall, prices were back down to US$6/bushel.

Lastly, while the recent oil plunge to negative $40 was a one-day event (shocking in itself), oil prices have also shown persistent price activity over long periods of time. Since it hit $140/barrel during the euphoric year that was 2008, it really has been trending lower since then. It hovered near US$100/barrel for four years between 2011 and 2015. Then it dropped and traded in a range averaging more or less around US$50/barrel for five years between 2015 and 2019. It is now at US$25/barrel. Based on historical price patterns, oil could stay within a wide range around US$25/barrel for a few years to come.

So, there’s no shortage of examples of extreme price movements. The common thread is that these moves can go further than you thought possible and last longer than you could imagine. While being aware of them, understanding them and learning from them is good, more important is how it relates to farm marketing decisions. One approach to dealing with volatile market conditions is to hedge incrementally over the course of the crop year. This help diversifies the timing of your pricing decisions to better manage the associated risk. Also, flexible option strategies are naturally a great tool for price volatility and uncertainty. They give you the downside protection you need with the upside potential you want. Finally, if you see a really strong basis level or an extremely good cash bid, take it for some of your grain. Combined, these can all be part of a portfolio of sound marketing decisions.

Bottom line, most of the time, perhaps up to half of the time, markets move in what can be considered a sideways trend. Although, whether a short-term event, medium-term trend or long-term condition, markets can and will surprise you more than you thought possible. When they do, have a proactive game plan with a range of hedging strategies in place to capture more of the large moves higher, mitigate some of the big drops and manage revenues over time.

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That’s despite a number of other well-established grain and oilseed advance administrators, including the Canadian Canola Growers Association (CCGA), Manitoba Corn Growers Association and Manitoba Livestock. All are headquartered in Manitoba.

“Thirty per cent of our total applicants that we processed last year were new applicants who never applied before for the cash advance,” Khurram said in an interview May 12. “That showed us there was demand for new competitors, and to increase the awareness of what the cash advance can be used for.”

In its first year FarmCash issued $30 million in loans to 250 farmers. Applications this year are up 62 per cent, she said.

The CCGA lent $2.1 billion to more than 11,000 farmers in 2019.

FarmCash currently offers no- and low-interest loans to Alberta farmers against 50 different products, including grains and oilseeds, livestock and honey under the federal government’s Advance Payments Program.

Unlike the CCGA, FarmCash has not seen a delay in issuing advances due to COVID-19 or new rules on assessing creditworthiness.

“FarmCash is operating as usual and we are processing applications as we originally planned despite the COVID-19 impact,” Khurram said. “We did have to implement some measures to meet farmers’ needs for this spring season, but despite those adjustments we have maintained our fast turnaround times, which are three to five business days. Our goal is to issue the advance three to five business days upon receiving a completed application. Due to COVID we were able to transition our staff quickly to working from home.”

While the CCGA has 50 employees issuing cash advances that had to be set up to work at home due to COVID-19, FarmCash has 2.5.

There’s lots of room to increase cash advances in Alberta.

“Only 25 per cent of Alberta producers are utilizing this program,” Khurram said. “We wanted producers to leverage this program as effectively as we could to meeting their short-term cash flow obligations so seeing this increase (this year) is great.”

Khurram is certain a big part of the reason farmers are increasingly signing up with FarmCash is because so much of the process can be done online making applying easier and quicker for farmers. It also speeds up the process for staff, she said.

“This year 97 per cent of our applications are using those online features, which primarily include the e-signing application online, they can upload the required documents online,” Khurram said. “This makes the process much faster and easier for them. We are seeing a lot of producers are taking advantage of these time-saving tools…”

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