WINNIPEG — Falling farm income and rising input costs mean Canadian producers will be in a tough financial position this year, says National Farmers Union president Jan Slomp.
Farmer’s net cash income is expected to drop this year, declining nine percent to $13.6 billion, according to a 2016 outlook released by Agriculture Canada.
It’s lower than last year’s record-high net income but is still 14 percent higher than the 2010-14 average.
However, Slomp said 2016 will still be a hard year for producers.
“I really expect big trouble,” he said.
“We are really in a tougher position than ever before.”
Slomp said higher input costs for equipment, fertilizer and chemicals are causing financial stress for farmers.
In Alberta, a combine that cost $380,600 in January 2015 was $451,000 this past January, according to research from Alberta Agriculture.
A tractor that cost $120,000 in 2015 will now cost $139,000.
“Our equipment is very costly and it has been handling more acres,” Slomp said.
He said the falling loonie has benefited farmers in some aspects, such as boosting the competitiveness of Canadian commodities, but it also increases the cost of fertilizer produced in the United States.
“It’s going to be very hard because the input costs have shot up … fertilizer costs, chemical costs, and we have become way more dependent on doing way more acres with the same man hours,” he said.
Phosphorus-based fertilizer and herbicides are marginally more expensive now than they were in January 2015, according to Alberta Agriculture, and prices for phosphorus and nitrogen-based fertilizer tend to increase in spring.
However, farmers may be in a better position to deal with volatility in commodity prices and the associated income fluctuation because their debt-to-asset ratio has narrowed in recent years.
Farmers had taken on $5 billion more in liabilities as of Dec. 31, 2014, which is the most recently reported data from Statistics Canada on farm debt, but they also narrowed the debt-to-asset ratio to 15.2 percent, which is the lowest recorded since 1997.
However, analysts point out that a large amount of farmers’ assets are land, which is not a liquid asset.
“If you look at land appreciation, we’ve done very well, but you can’t live off that,” Slomp said.
“A lot of farmers have bought extensive land, and we’ll be in a crunch.”