Net farm income in Canada will decline slightly in 2010, and then rebound in 2011, says TD Bank Financial Group.
The decline in net income this year reflects, in part, increases in farm input costs, including energy, fertilizer, transportation and wages.
The projection in TD’s fourth annual agriculture outlook report released last week also forecasts an increase in farm cash receipts of three to six percent this year. Exceptions include Manitoba and Saskatchewan, which will decline by 0.5 and five percent respectively, according to the report.
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The outlook for next year is more optimistic, although not for everybody.
“Canadian farm income prospects appear brighter in 2011,” said the report. “However conditions are likely to vary across the country.”
Net farm income is expected to rise by 27 percent in 2011 to $3.24 billion.
Farm cash receipts are expected to increase, ranging from 3.7 percent in Prince Edward Island to seven percent in Saskatchewan, according to the report prepared by TD’s deputy chief economist Derek Burleton.
He said 2010 will be remembered as another eventful year in agriculture, with flooding in Western Canada, drought in Eastern Europe, fluctuating prices and unpredictable currency markets.
“The unanticipated events of recent months have continued to put the planning and risk management capabilities of Canadian farmers to the test,” said Burleton.
The report said that while global market fundamentals support crop prices, the recent surge has been largely driven by substantial outside investment in agricultural commodities.
Those investments could reverse in 2011, putting prices at risk of falling, although continued rapid food demand growth in emerging markets will help to limit declines in world crop and livestock prices.
The rising Canadian dollar has had a negative impact on agricultural prices for Canadian producers in 2010, as the loonie rose from 93 cents US at the start of the year to a high of 99 cents in October.
TD expects the dollar to settle around parity with its U.S. counterpart in 2011. Despite that, prices for key agriculture commodities are projected to remain above their longer-term (2002-2007) averages.
The forecasted net farm income in 2011 is listed by province in millions of dollars. 2010 numbers are in brackets:
•Alberta -100.3 (37.6)
•Saskatchewan -1,526.7 (1317.9)
•Manitoba -381.9 (338.5)
•British Columbia -108.8 (-73.7)
•Ontario -230 (97.1)
•Quebec -833.8 (797.8)
•Canada -3,235.2 (2,546.7)
