Farm income predictions for this year represent a graphic tale of two agricultural sectors heading in dramatically different directions.
Agriculture Canada has predicted that both hog and cattle farms will lose money in 2008 despite receiving several billion dollars in program payments.
Meanwhile, grain and oilseed sector farms will see a startling 40 percent increase in net cash income compared to 2007. Program payments will sharply decline.
In Saskatchewan and Manitoba farm receipts are expected to exceed off-farm income for the first time in years.
“There’s some great news in this forecast,” Jan Dyer, director general of research and analysis told a Feb. 8 briefing on the forecast.
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“This year after many years of declining prices, the farm income forecast due to higher crop prices will see net farm income per farm in 2007 increase by about 15 percent and a further 18 percent in 2008.”
The news on the livestock side of the ledger is more grim.
“At the same time, we recognize that higher input costs are going to cut into farmers’ profits, especially in the cattle and hog sector as they are expected to face significant income declines in the next two years,” she said.
Department economists, in collaboration with provincial agriculture departments, predict that despite an average hog farm program payout of $120,000 in 2008, the financial results for the year will be a loss of $3,517. If depreciation was factored in, the loss would be much higher.
On the average cattle operation, the estimate is that cash losses will be $5,076 before depreciation.
The projections now will become fodder for the political debate about the proper government response.
Martin Rice, executive director of the Canadian Pork Council, said the dire predictions provide ammunition in trying to convince the government that more must be done for the sector. The pork council has asked for a government loan program.
Rice worried about the prediction that more than $1 billion will go to the hog sector this year in program payments, wondering if it might stir Americans to consider a trade challenge.
“That will be interesting to our friends to the south,” he said.
“But there is a fair degree of confidence that the program that we will be receiving money through will be considered whole farm and therefore not subject to challenge.”
Canadian Federation of Agriculture president Bob Friesen said the numbers make the case for hog sector help.
“We have been trying for some time to make it clear to the government that something more than existing programs has to be done,” he said Feb. 11. “It is surprising that we have not yet received an adequate response but this will be hard to ignore.”
National Farmers Union research director Darrin Qualman said the real story of the income projection is the evidence that despite record grain prices, farmers overall will not be able to make their living from the marketplace.
Once depreciation costs are added to the equation, national realized net farm income earned from the market in 2008 would be $1.2 billion below costs, he said in a release from NFU head offices.
National realized net farm income only registers a positive $2.57 billion in 2008 because of $3.75 billion in projected program payments.
Qualman said because of escalating input prices and large profits being reported by fertilizer, energy, farm equipment and other input manufacturers, policy makers must get curious about where the money is going.
Between 2006 and 2008, farm operating expenses are projected to increase almost 12 percent to $35.2 billion.
Tony McDougall, chief of the farm income forecast unit at Agriculture Canada, said that 2008 expenses actually will be higher than projected in the department report. Because the expense estimates were made in late 2007, the fertilizer price predictions underestimated prices farmers actually will have to pay this year.
The department says that program payments will decline to $3.7 billion this year, down 17 percent from 2006 levels.
In Saskatchewan, net cash income on an average farm in 2008 is projected to increase almost $7,000 to $44,480. In Manitoba, the comparable number is $43,873 and in Alberta, $39,676.
In Alberta, higher off-farm income is predicted to increase total farm family income by 11 percent to $106,885.
