The number jumps off the page. Saskatchewan’s realized net farm income for 2011 is estimated by Statistics Canada at a record-shattering $2.8 billion. The previous record was in 2010 at nearly $1.8 billion.
While Saskatchewan’s farm income has never been better, Alberta is struggling. The difference: Saskatchewan’s farm economy is dominated by grain, while Alberta relies heavily on livestock.
Alberta’s realized net farm income for 2010 was a negative number, minus $178 million. There’s an improvement for 2011, but realized net income was still only $367 million.
Even Manitoba, with a much smaller land base, is doing better than Alberta. Manitoba recorded a net farm income of $603 million in 2010 and $499 million in 2011.
Many numbers can be used to measure the health of the farm economy, but realized net income is probably the most common. It’s the difference between farm cash receipts and operating expenses, minus depreciation.
Putting Saskatchewan’s $2.8 billion into perspective, the realized net farm income for all of Canada was slightly less than $5.7 billion, so Saskatchewan accounted for half of the nation’s net farm income. The next highest after Saskatchewan was Quebec at slightly less than $1.2 billion. Ontario was at $730 million.
Total cash receipts went up dramatically in Saskatchewan between 2010 and 2011. In 2010, money from the sale of grain and livestock, including any program payments, totalled slightly more than $9 billion. For 2011, cash receipts were slightly more than $11 billion.
The expense side of the equation also increased, but not nearly as fast as the rise in income. Saskatchewan farmers’ total operating expenses increased about $800 million between 2010 and 2011, while depreciation went up by more than $100 million.
Alberta had comparable cash receipts, about $9 billion in 2010 and more than $10 billion in 2011. However, expenses were much higher. Of course, the biggest expense for cattle feedlots and hog operations is the cost of feed. Strong grain prices benefit Alberta grain producers, just as they do grain producers in Saskatchewan, but they limit returns in the livestock sector.
There has long been a push to get a more balanced farm economy in Saskatchewan, one that’s more evenly split between grain and livestock. Saskatchewan has the second largest beef breeding herd in the country with 30 percent of the cows, compared to 40 percent in Alberta. However, Alberta dominates the feedlot industry.
As well, Alberta and Manitoba have much larger hog industries.
Saskatchewan’s reliance on grain has typically been viewed as a weakness. Alberta’s farm income numbers used to regularly eclipse those of Saskatchewan. There were many years when Saskatchewan would have had negative net farm income had it not been for government payments.
These days, it’s clear that the big money is in grain. And on the beef side, cow-calf operators have been doing better than the feedlot sector, so Saskatchewan has actually benefited from shipping calves to Alberta for feeding.
Preliminary farm cash receipt statistics for 2012 suggest the trend is continuing. Little wonder that land prices are sizzling hot and farm machinery sales are brisk.
Maybe it will someday reverse again. Maybe in three or five or seven years it will be livestock making the profit and grain that’s struggling.
But for now, grain is golden and that makes Saskatchewan king of the provinces when it comes to realized net farm income.