Realized Net Farm Income Rises In 2014

Realized Net Farm Income Rises In 2014

on December 6 | in Ag News | by | with No Comments

The realized net income of Canadian farm producers rose 23.0% to $7.7 billion in 2014, marking the fourth increase in five years. A report from Stats Can says it follows a 0.7% decline in 2013. Gains in receipts outpaced higher operating expenses.

Realized net income is the difference between a farmer’s cash receipts and operating expenses, minus depreciation, plus income in kind.

Realized net income increased in every province except Newfoundland and Labrador, Prince Edward Island, Nova Scotia and New Brunswick. Strong gains in Saskatchewan and Alberta accounted for much of the national increase.


Farm cash receipts

Farm cash receipts, which include market receipts from crop and livestock sales as well as program payments, rose 4.7% to $57.8 billion in 2014. This was the fourth consecutive annual increase. Receipts rose in every province outside of Atlantic Canada.

Market receipts increased 6.0% to $55.7 billion, as rising livestock receipts more than offset declining crop receipts.

Revenue for livestock producers rose 19.3% to $25.7 billion in 2014, marking a fifth consecutive annual increase. Lower North American supplies pushed cattle and calf prices higher, contributing to a 44.4% increase in receipts. Also boosted by stronger prices, hog revenues rose 25.2%.

Receipts for supply-managed commodities (dairy, poultry and eggs) rose 1.1%, as a 3.1% gain in dairy receipts more than compensated for a price-related decrease in poultry revenues.

Ample supplies of grains and oilseeds contributed to downward pressures on prices, pushing crop receipts down 3.2% to $30.0 billion. With the exception of canola and flaxseed, receipts decreased for all the major grains and oilseeds as price declines offset generally higher marketings. Canola revenues were up 0.6% despite a 20.8% drop in the average price.

A 19.9% reduction in deferred grain receipts and a 26.2% increase in lentil receipts also tempered the drop in crop revenues.

Program payments fell 21.8% to $2.1 billion in 2014, with decreases in crop insurance and provincial stabilization payments accounting for the bulk of the decline.


Farm expenses 

Total operating expenses (after rebates) increased 2.1% to $43.6 billion in 2014. Much of the increase can be traced to a 47.8% gain in livestock purchases as cattle and calf prices rose sharply. Higher debt levels pushed interest expenses up 6.6%.

Moderating the increase was a 15.4% decrease in crop and hail insurance premiums that reflected large decreases in Ontario and the Prairie provinces. There was also a 2.5% decrease in feed expenses that was triggered by lower grain prices.

Total farm expenses, which comprise operating expenses and depreciation, increased 2.3% to $50.1 billion in 2014, as depreciation charges rose 3.9%.

Total farm expenses increased in every province except New Brunswick, Quebec and Manitoba, where there were marginal declines. The largest increase was in Alberta (+5.7%).


Total net income

In 2014, total net income decreased $7.6 billion to $4.8 billion. New Brunswick was the lone province to record a gain.

Total net income is realized net income adjusted for changes in farmer-owned inventories of crops and livestock. It represents the return to owner’s equity, unpaid farm labour, management and risk.

As was the case with the $6.1 billion increase in total net income in 2013, the 2014 decline was driven by inventory changes. On-farm stocks of most of the major grains and oilseeds fell sharply when production in 2014 returned to more normal levels after the bumper crop of 2013.

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