Agriculture Canada expects record farm income for 2017 and forecasts near-record levels for this year.
The department’s latest outlook suggests net cash income will come in at $16.2 billion in 2017, up five percent from the year before.
“Net cash income is expected to then decline modestly to $15.6 billion in 2018 as operating expenses increase more than farm cash receipts,” the report said. “This, however, would still be the second-highest level on record.”
Saskatchewan Agriculture Minister Lyle Stewart said he isn’t quite as optimistic as the outlook.
“It’s not going to be a record for 2017 on my farm, I know that,” he said, adding his operation is typical of southern Saskatchewan farms.
“The north half of the grain belt had very large crops in 2017 but they’re most affected by the slowdown in rail transportation.”
Stewart said he hopes 2018 will result in strong production, but he is concerned about the import tariffs India has placed on lentils and peas. India is Canada’s largest customer of those crops.
“So, I’m skeptical we’ll be quite as well off as what they’re saying,” he said.
That said, he noted there could be compensation in the form of larger than expected production or price bumps in other areas.
Crop receipts are expected to be one percent higher in 2017 at $34.5 billion and grow a further two percent to $35 billion. That would set a new record.
The report, which was developed by consensus with the provinces and Statistics Canada, acknowledged weakness in international grain market prices but said crop receipts should rise in both years because of strong domestic harvests and prices supported by a low Canadian dollar.
Livestock receipts will be up by four percent to $24.8 billion in 2017 and rise again to $24.9 billion this year, said the report. That forecast is based on higher red meat prices due to strong world demand.
“Net operating expenses are forecast to increase modestly in both years, led by higher outlays on labour, commercial feed and energy,” said the report.
The report also said growth in asset values is expected to raise average farm net worth to $3.16 million this year.
Risks to the forecast include a large swing in oil prices or the exchange rate, or both, and of course the weather.
“The macroeconomic outlook is relatively stable for the forecast period and generally supports farm income levels,” said the report.
It projects direct program payments will be $2.6 billion in 2017 due to AgriInsurance claims and $2.7 billion this year from increases in AgriStability.
The outlook notes that projected world economic and population growth is moderating, which implies that future gains might be smaller than those recently seen.
Global population growth is expected to be an average of 0.9 percent each year between 2018 and 2027 to reach 8.2 billion. That compares to a growth rate of 1.2 percent annually in the previous 10 years.
More than half of the increase is expected to be in sub-Saharan Africa.
Continued demand growth from Asian economies outside of China, particularly India, is forecast.
The report also said that a slow-down in biofuel expansion will also affect demand.
“The previous boom in biofuels was associated with continued progress toward fulfilling new government mandates,” it said. “However, in the U.S., the ethanol content in gasoline has already reached its ‘blend wall’ of approximately 10 percent, which suggests only minimal increases in mandates in the years ahead and challenges in marketing greater quantities.”
As oil prices climb, that could put downward pressure on consumption and therefore on blending demand.
Trade in soybeans and other oilseeds will see the strongest gains compared to other commodities.