Farmers posted record aggregate net cash income last year

Canadian farmers generated a record $14 billion in aggregate net cash income in 2014, according to a new Agriculture Canada report released today.

Taken down to the farm level, that’s an all-time high of $78,139 in average net operating income.

“It’s something that we’ve been working for all of our careers is to see numbers like this,” said Norm Hall, president of the Agricultural Producers Association of Saskatchewan.

“But they could have been better (if it wasn’t for) profit taking by the grain companies.”

Hall contends aggregate net cash income could have been as high as $17 billion if grain companies hadn’t gouged farmers with excessively wide basis levels.

The forecast for 2015 calls for $13 billion in net cash income, which is down from 2014 but still well above the recent five-year average.

Slumping grain and oilseed prices dragged down crop receipts by five percent in 2014 to $29 billion. They are expected to fall another four percent in 2015 to $27.9 billion.

Faltering prices were partially offset by higher grain sales in 2014 due to a huge carryout from the 2013 crop. A weakening Canadian dollar also bolstered farm incomes.

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Dan Mazier, president of Keystone Agricultural Producers, said that was probably a big factor behind the record income.

“That’s the only reason our canola prices have stayed up,” he said.

“Even though soybean prices and oil prices have come down, our Canadian dollar advantage is sure shining.”

Livestock receipts increased by 19 percent in 2014 to a record $25.5 billion as cattle prices responded to reductions in the U.S. herd and hog prices jumped in response to the spread of porcine epidemic diarrhea virus.

“Hopefully that continues all through 2015 because livestock producers need that kind of boost after all the poor years,” said Hall.

That’s exactly what Agriculture Canada is forecasting. It believes cattle prices will rise four percent in 2015 due to continued tight supplies.

However, hog prices are expected to slump due to the increased availability of slaughter hogs. That will cause incomes to return to long-term average levels, which doesn’t sit well with Lynn Jacobson, president of the Alberta Federation of Agriculture.

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“If it drops their income back to historic levels over the last five years that puts hog producers into a loss position,” he said.

Incomes for the dairy and poultry sectors will not show significant growth in 2015 but are expected to remain at high levels compared to other sectors as prices and cost of production hold steady.

The average net worth of a Canadian farm was $2 million in 2014 and is expected to rise to $2.1 million in 2015 due in a large part to increasing land values.

Jacobson said that is a reflection of rising land values. A quarter section of irrigated land near his farm in Enchant, Alta., now sells for over $1 million versus $330,000 10 years ago.

He worries what that means for new entrants into the farming business.

“It makes it harder for young producers to get into the business, especially if they don’t inherit it or marry it,” said Jacobson.

Contact sean.pratt@producer.com

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  • ed

    Now just hang on a minute guys before we trash our reputations on parroting the irresponsible mis-reporting of Agriculture Canada’s farm net income numbers. For starters, nearly a couple of decades ago when net incomes on the farm were so incredibly low on average, these wonderful ag. bureaucrats decided that if you took that “real” number out of machinery and building depreciation , it improved the bottom fictionally. The farmers and farm groups were OK with that it seemed. Fast forward to today’s reporting of an average all time record high (not adjusted for inflation) positive income of over $78,000 and you can get very suspicious. It may even still be a negative number. Will the total aggregate debt out on the farm go down dramatically because of this new found wealth. No, it will not and there is one explanation as to why that is. The numbers are not in any way truthful. They are fudged so to speak.

    On an average farm with a net worth of $2.0 million you have a wide variation of financial components. That number is your net if you sell everything right down to the shirt on your back and pay off debt and count the remaining pile of money. Most of these farms have lots of rented land and require several $millions of machinery that depreciates over time via age, use and wear to operate. On a $3-4 million arsenal of machinery, that could easily be $60-80 of depreciation in real terms at 15%. We all know that the 30% allowance on a new self propelled machine beyond the first year may be a bit much, and 15% may be a more appropriate amount. The bottom line is that it is a real cost and does not show in Ag. Canada’s reporting of a correct operating net income. Refinancing of land to make capital payments on depreciating machinery is thus also never picked up in their reporting and thus makes what can be a dire financial situation look pretty rosie which of course is the goal. That debt is elsewhere on a farmers ledger. It has fooled many people. including those “dig deep” reporters, in masking the farm financial picture from slightly bad thru to extremely bad times. Do not be fooled by the mirage. Food producers around the globe are in big trouble and the production systems are all built on a pyramid of schemes that are flaming out. I would urge journalists to, for the good of this industry, to actually dig a little deeper. Let’s get the whole story.

    • Terry

      Well said Ed. The overhead in farming is as high as any industry