Statistics should be taken with a grain of salt

It has long been said that there are three kinds of lies: lies, damned lies and statistics. As long as statistics are accurate, they provide useful information for analysis, but in the case of farm income statistics, what the numbers actually indicate is often open to interpretation.

Statistics Canada recently released a raft of numbers on farm income and expenses and you’ll see the numbers quoted in various forms as analysts and policy wonks comb through the reports.

Sometimes it’s possible to use the numbers to determine the farm economy is doing quite well or quite poorly. Often the picture isn’t clear cut.

Realized net income is farm receipts minus expenses including depreciation, but some analysts believe net cash income provides a better comparison from one year to the next because it takes depreciation out of the equation.

When realized net income and net cash income are both dropping there’s little doubt that the farm economy has tightened up, but it’s difficult to separate crops from livestock. Farm cash receipts are provided commodity by commodity, but the expense side of the equation doesn’t line up that neatly.

Expenses can also be misunderstood. Take, for example, the expense for fertilizer. If it goes up by five percent from one year to the next, many might assume that fertilizer was more expensive per tonne. That may be the case, but the increase may also have come in whole or part from the use of more fertilizer.

A new complication is the addition of cannabis into farm income statistics. In some provinces, this is a significant addition to farm receipts. You can subtract it from cash receipts, but there’s no way to know how much to subtract from the expense equation.

Farm income stats are broken down by province and one province may see rising farm income levels while another is dropping. Beef production is huge in Alberta, Saskatchewan is dominated by grain, Manitoba has a significant hog industry and dairy is a major force in Ontario and Quebec.

Within the beef sector, cow-calf producers can sometimes have a good year while feedlot operators are suffering heavy losses.

Within the grains sector, the crop mix varies dramatically from one province to another and that can have a major influence on profitability. Corn, soybeans and winter wheat dominate in Ontario. In the West, canola and wheat are big, but there are a half dozen or more other crops with a big impact on cash receipts.

You may see headlines that farm income or farm cash receipts have dropped by a certain percentage. The tendency is to compare only to the previous year. A more meaningful analysis looks at the last five or 10 years.

There’s always a lag with statistics. You’re always examining what has already happened. A drop in farm income for 2019 provides limited insight into how 2020 will turn out.

There are also statistics that seem to make little sense. For instance, according to Statistics Canada, the average price of farmland and buildings for 2019 was $2,941 an acre in Alberta, $1,489 in Saskatchewan and $2,193 in Manitoba. How are these numbers derived and where is all this cheap land?

Farm income statistics are useful and necessary, but the picture they paint is often murky and open to interpretation. The statistics themselves may not be a lie, but how they’re used can certainly be misleading.

Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh.ca.

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