Falling crude oil prices and the slumping Canadian dollar helped Canadian farmers earn record net cash income last year, says the federal government.
Agriculture Canada said in its Feb. 19 Canadian Agricultural Outlook report that income will drop slightly this year but still be historically high.
“Our analysis shows that 2015 and 2016 should be among the most successful years in the history of Canadian agriculture,” said Rodney Myer, director of the department’s farm economic analysis division.
Net cash income in 2015 is ex-pected to be $15 billion, which is six percent higher than the 2014 record.
The department forecasts a drop to $13.6 billion this year.
Average farm family income is projected to reach $136,900 this year, 78 percent of which will come from off-farm wages and investments.
Net operating income for 2015 is forecast at $77,287, eight percent higher than 2014.
Myer said the lower dollar and crude oil prices have insulated Canadian farmers from the weakness detected last year in world commodity markets due to stronger supplies of most major commodities.
Prices for most grains and oilseeds, beef, pork and milk all weakened over the year.
Most commodities produced in Canada are traded in international markets, where they are priced in American dollars, Myer said.
The depreciation of the dollar from an average of US91 cents in 2014 to 77 cents in 2015 and a forecasted 75 cents this year, will support farm cash receipts.
The West Texas intermediate crude oil price has fallen from $100 in the summer of 2014 to an average $49.88 per barrel last year, saving farmers $500 million in fuel costs.
“Looking out to 2016, we are using a conservative assumption that crude oil prices will strengthen to $51.31,” Myer said.
However, last month crude was trading between $30 and $35 per barrel.
“While we are still a few months away from the growing season when fuel usage is the heaviest, if these price levels persist throughout the year, producers could see at least a further half billion dollars in fuel cost savings in 2016 on top of the approximately half billion they saved in 2015,” he said.
Farmers grew 83.9 million tonnes of grains and oilseeds last year, the second highest on record, after a dry start to the season led to drought concerns. Myer said there were pockets where drought persisted, but overall the season resulted in a two percent increase in farm cash receipts for crops and a total $30.7 billion.
“The strong production from the 2015 growing season will support marketings during the first half of 2016, resulting in farm cash re-ceipts for crops being unchanged from 2015,” he said.
Total livestock receipts will increase by two percent in 2015 to $26.2 billion and drop slightly in 2016.
Cattle receipts in 2015 are expected to be 14 percent higher than 2014, at $11 billion, and weaken by four percent this year as the results of herd expansion come into effect Still, the industry will stay profitable, Myer said.
The hog sector will likely see a 20 percent decline in farm cash receipts for 2015 as U.S. producers recover form the porcine epidemic diarrhea outbreak and increase supplies. Receipts will be $4 billion.
The sector’s farm cash receipts will drop by one percent this year, the forecast shows.
Program payments to producers will decline in 2015 to $2.1 billion because most sectors have been performing well.
Total payments are projected to increase by 18 percent this year, mainly through higher AgriStability payments for income shortfalls on hog farms and the effects of drought in parts of the Prairies.
Myer said the value of farm assets and the amount of farm debt are going up, but asset values are climbing more quickly, leading to an increase in the overall net worth of Canadian farmers. Net worth in 2016 is expected to reach an average of $2.7 million per farm.