Program payments are falling and production costs are soaring, but the Canadian farm sector is poised to log a record $13.1 billion net cash income for 2012, says Agriculture Canada.
It projects a softening of grain prices and therefore grain and oilseed farm net cash incomes this year, but livestock producers will see a bump in their bottom lines because of lower feed costs.
Meanwhile, the department projects that the average value of net farm assets will hit a record $1.9 million in 2013.
And while weather patterns and growing conditions cannot be predicted, a farm income outlook published by the department suggests the sector is in for a decade of good returns.
“Many of the drivers of farm income over the two-year period (2012-13) of the forecast will also be felt over the next 10 years,” said the analysis.
“These include continued growth in world demand for grains and oilseeds for human consumption (and) for animal feed as incomes rise around the world and demand for meat increases.”
It said continued demand for grain as biofuel feedstock is part of the equation.
It was a blast of good news for federal agriculture minister Gerry Ritz that he was happy to spread at the Canadian Federation of Agriculture annual meeting, in Parliament and at the House of Commons agriculture committee last week.
In addition to record net cash income last year, Ritz told the agriculture committee that the value of agriculture and food exports increased 7.4 percent to a record $47.7 billion.
“The bottom line is it is a great time to be involved in Canadian agriculture,” he said after the meeting.
“I’m buoyed. Over the past few years we’ve seen a growing bottom line in the farm sector, and we’re starting to get into numbers that make sense for the size and capacity of the farm sector in Canada.”
Shortly after, Ritz and farm representatives flew to Japan on a trade mission that in part will promote the idea of a Canada-Japan trade deal.
Richard Phillips, executive director of Grain Growers of Canada, who was accompanying Ritz to Japan, said in a March 4 email the numbers reflect the mood he has been hearing at farm meetings this winter.
“There is a real sense of optimism out there, and not only is the gross income higher but the net income has taken a big jump, meaning input costs have not risen exponentially to absorb the income,” he said.
“In the past, a couple of good years would slide by with a small bump in cash rent, but now we are also seeing a huge interest from non-farmers and foreign investors trying to get a piece of agriculture.”
CFA president Ron Bonnett said the numbers are a reflection of good times in agriculture, although cattle and hog producers continue to struggle with income.
“It is good news and even next year it is good news,” he said. “Market conditions are generally good and land values are up.”
However, Bonnett cautioned that agriculture’s high debt level “still makes it susceptible to an interest rate spike.”
Farm debt has set records every year since 1994 and is now well over $60 billion. The 2012 farm debt numbers will be published in May.
Last year’s explosive farm income increase also masked the fact that production expenses increased more than $2 billion and are projected to increase another two percent next year.
The net cash income numbers also inflate real farm income because they do not take into account farm asset depreciation that leads to the “realized net farm income” that economists consider the most accurate gauge of farm financial health.