As a Saskatchewan farmer and an economist, Richard Gray has lived through and analyzed both the upside and the downside of his province’s grain-dependent farm economy.
These days are definitely the upside.
“Being so weighted to grain and oilseed production is the key here,” the University of Saskatchewan agricultural economist said May 25 after Statistics Canada confirmed that 2008 was a boom year for Saskatchewan’s farm economy.
“When prices are low, as they were for many years, the economy suffers. When prices are high, as we see now, the economy is hot.”
Read Also
Canada’s plant hardiness zones receive update
The latest update to Canada’s plant hardiness zones and plant hardiness maps was released this summer.
Last year, realized net farm income (receipts minus expenses and depreciation) almost doubled to $1.57 billion in Saskatchewan, according to the federal agency. The next closest provincial result was Quebec at $846 million.
A 28 percent increase in market revenue to $8.8 billion masked a sharp 16.4 percent ($1 billion) increase in expenses and a $500 million increase in provincial farm debt during the year.
Gray said 2009 should be another good one. Prices remain decent while fertilizer and diesel prices, the main input costs, are well below last year’s levels.
“Cash-wise, 2009 is shaping up to be a good year regardless of what happens to the crop,” he said. “My guess is 2009 is going to look as good, perhaps even better.”
Across the country, Statistics Canada reported that realized net farm income increased by $1.1 billion to $3.2 billion on the basis of a $5 billion increase in receipts. Included in those receipts were $4.1 billion in government program payments.
Eighty percent of the increased revenue was gobbled up by soaring input costs, which Statistics Canada said increased faster than in any year since 1981.
Also beneath the surface of the buoyant farm income news was the steady growth in Canadian farm debt.
By Dec. 31, 2008, the federal agency estimated Canadian farmers owed $58 billion, almost $3 billion more than a year earlier. The debt has increased 32 percent in the past six years and by 150 percent since 1993, when for several years the Canadian farmer indebtedness had actually decreased.
Gray said some debt increase can be attributed to quota purchases in the supply management systems that operate in the dairy, poultry and egg sectors.
He noted that the debt load has generally been manageable because of record-low interest rates.
“But a number of economists are speculating that the United States could resort to inflating its way out of the recession and if that happens, there could then be higher interest rates to control the inflation and then we would see how vulnerable we are,” he said.
He also noted, as did Statistics Canada, that despite the global numbers, not all farmers will have experienced the good times in 2008.
Cattle and hog operation incomes were down and even in the grain sector, some farmers may have locked in prices that did not reflect peaks or locked in input supplies at higher prices.
The federal agency’s disclaimer stated: “Realized net income can vary widely from farm to farm because of several factors including commodities, prices, weather and economies of scale.”
It said that while crop receipts increased 25 percent last year, hog sector revenues declined for the fourth consecutive year, last year by 2.4 percent.
Cattle sector revenues were up slightly, mainly because of a 13.6 percent increase in exports, primarily to the United States.
Meanwhile, as input costs rose, supply management prices increased, leading to a 5.7 percent increase in receipts.
Prince Edward Island and British Columbia both recorded a net loss in realized net farm income last year and four provinces including Manitoba had lower income compared to 2007.
Manitoba’s farm economy saw realized net farm income fall by one-third to $232 million while in Alberta, income increased to $452 million, four times the 2007 level.
Ontario also recorded a tripling of realized net farm income to $271 million but as Canada’s largest agricultural economy with more than $10 billion in market receipts, the result showed a farm sector barely breaking even.
