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REALIZED NET FARM INCOME DROPPED IN 2017

on June 11 | in Ag News | by | with No Comments

From the Statistics Canada report, released on May 28

Realized net income decreased 2.5% in 2017 to $8.3 billion, the first decline since 2013 and only the second decrease since 2009.

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

Rising depreciation charges, together with slightly higher operating expenses, more than offset a small increase in farm cash receipts.

Realized net income was lower in five provinces: Nova Scotia, New Brunswick, Quebec, Ontario and Saskatchewan. The decreases in Ontario and Saskatchewan contributed most to the small national decline.

Annual farm cash receipts rise for the seventh consecutive year

Farm cash receipts, which include market receipts from crop and livestock sales as well as program payments, rose for the seventh consecutive year, up 1.8% to $61.6 billion in 2017. This was the second-smallest increase during this period, surpassing only a 1.2% rise in 2016.

Receipts were up in six provinces, led by Manitoba (+9.0%) and Alberta (+4.5%). Nova Scotia (-5.7%) posted the largest percentage decrease.

Market receipts increased 1.9% to $59.2 billion, as livestock receipts rose, while crop receipts were essentially unchanged from 2016 levels.

Market receipts are the product of price and marketings. Marketings are quantities sold, using various units of measure.

Receipts for livestock producers totalled $25.0 billion in 2017, up 4.5% over the previous year. Increases were widespread, with gains in supply-managed; hog; and cattle and calf receipts. A 6.2% rise in marketings pushed dairy receipts 6.3% higher, accounting for the bulk of the increase in the supply-managed sector.

After two years of decline, hog receipts increased 9.8%, mainly due to higher prices. Continued growth in pork exports supported prices.

Revenue from cattle and calf production rose 2.3%, despite slightly lower prices. Marketings increased 2.8%, as increased domestic slaughter more than offset a drop in the number of animals exported.

Crop receipts were unchanged from 2016 at $34.1 billion. Revenues for lentil producers fell 45.7%—a second year of declines after more than doubling in 2015 in the wake of world production disruptions. A 30.0% drop in dry pea receipts followed a 68.0% increase in 2016. Export markets for lentils and dry peas weakened significantly in 2017, driving down both prices and quantities sold.

Soybean receipts fell 6.5%, contributing to lower crop revenues in Quebec and Ontario. Marketings were down despite a small rise in exports. Higher stocks put downward pressure on prices.

Counteracting these decreases were increases in canola and wheat (excluding durum) receipts. Canola receipts were up 7.3% in 2017 with both export and domestic markets remaining buoyant. Prices increased 2.1% while marketings rose 5.1%.

Revenues from wheat (excluding durum) production rose 13.2% in 2017 after falling 10.9% the previous year. Both marketings (+7.4%) and prices (+5.4%) increased.

Lower payments from private hail insurance and provincial stabilization programs pushed program payments down 0.3% to $2.4 billion in 2017.

Farm expenses continue to climb

Total operating expenses (after rebates) rose for the seventh consecutive year, up 2.4% to $46.2 billion in 2017. This follows a 0.5% rise in 2016. Most expense items rose.

Following two consecutive annual declines, machinery fuel expenses increased 11.5%, as prices rose at a similar pace.

Higher prices and larger interprovincial movements of cattle and calves pushed livestock and poultry purchases up 12.3%.

Interest expenses rose 7.1%, primarily the result of higher debt levels.

Moderating these increases was a 3.8% price-related decline in fertilizer expenses.

Total farm expenses, which include total operating expenses and depreciation, rose 2.5% to $53.4 billion in 2017. Total farm expenses were up in every province, with Alberta (+3.7%) posting the largest percentage rise. Quebec (+0.9%) had the smallest.

Little change in total net income

Total net income was essentially unchanged in 2017 at $9.8 billion. This follows a $1.8 billion increase in 2016. Total net income was up in six provinces, led by Manitoba.

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.

The value of inventory change had a positive impact on net farm income. On-farm stocks of soybeans and canola rose in 2017 as did inventories of cattle and calves. These increases more than offset a production-related drop in durum wheat stocks.

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