Canadian farmers are in the midst of an income boom that will soften in the next few years but remain strong by historic standards into the decade.
This was the key message of an Agriculture Canada farm income forecast released Feb. 20 that projected Canadian realized net farm income this year at almost $5.3 billion, 86 percent above the 2006-10 average.
The projection is down 11 percent from 2011, but last year set a farm income record of almost $6 billion in realized net farm income.
The numbers show that Saskatchewan has become Canada’s agricultural powerhouse, boasting a 2011 realized net farm income (income minus expenses and depreciation) of a record $2.27 billion, the best provincial result in Canada.
This year, despite a projected 20 percent decline to $1.9 billion, the province will remain the provincial gold standard, far outperforming Ontario, Quebec and Alberta.
Saskatchewan agriculture minister Bob Bjornerud said it is a happy combination of higher grain prices, high yields in areas not flooded last year and an increase in program payments in 2011 because of flooded acres.
“It’s really on both sides, the grain side and livestock, where prices are improving dramatically, and the numbers reflect that we’re in a really good spot right now,” he said.
By contrast, Manitoba is projected to have the worst farm income results this year at $21.2 million, a 95 percent decline from last year when program payments helped offset some of the flooding losses.
“Clearly our sector is struggling right now,” Keystone Agricultural Producers president Doug Chorney said.
“With the flooding hangover, many farmers could not take advantage of the higher prices.”
The Agriculture Canada projections, backed up by Statistics Canada figures that reported a record 2011 farm income, led to claims last week that these are golden times for most Canadian farmers.
Commodity prices are higher, trade is increasing, farm asset value is growing and the next few years look like more of the same.
The higher commodity prices more than compensate for projected production costs in 2012 that are 12 percent higher than the 2006-10 average.
They also do not account for record levels of farm debt and the fact that debt servicing costs are one of the fastest growing expenses despite record low interest rate levels.
“There is a lot of optimism in the industry right now,” Farm Credit Canada senior vice-president for marketing Lyndon Carlson told the Canadian Federation of Agriculture annual meeting Feb. 22.
“It is evident in farmer decisions to invest.”
Federal agriculture minister Gerry Ritz agreed.
“It’s certainly a great time to be in agriculture,” he said during a Feb. 24 news conference from Washington.
“Today more than ever, agriculture is front and centre.”
Even Ontario, Canada’s largest agricultural province, has rebounded after years of meager farm returns despite multibillion-dollar sales.
In 2012, the province is projected to have realized net farm income of $1.14 billion compared to a previous five-year average of just $250 million in a $9 billion farmgate sales economy.
“Finally, the stars are lining up well for hard-working Ontario producers,” Ontario agriculture minister Ted McMeekin said.
CFA president Ron Bonnett said the income projections are good news. “It is always good to have some good news.”
But at the CFA meeting, he also warned farmers to be cautious about spending or investing based on the assumption today’s returns will become normal.