According to the latest federal census, Saskatchewan farmers pocketed
more of every dollar of revenue generated in 2000 than their
counterparts in Alberta and Manitoba.
Producers in that province kept 15 cents out of every dollar sold.
Alberta farmers pocketed 10 cents and those in Manitoba held on to 13
cents, which was the national average.
Those numbers puzzle Saskatchewan producers, who are currently forecast
to be at the bottom of the heap in terms of realized net income.
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The numbers appear to fly in the face of conventional wisdom, which
says Saskatchewan farmers are faring worse than their neighbours in
Alberta and Manitoba, who can rely on livestock receipts to offset poor
prices for grains and oilseeds.
Saskatchewan Agriculture assistant deputy minister Hal Cushon said the
margin data that came out of the census can be misleading.
“Does this say we did better than Alberta? The answer is no, it doesn’t
say that.”
What the numbers do say is that the margins in Saskatchewan’s grain
industry are better than those in Alberta’s livestock business, said
Cushon.
Census data shows the average beef farm spent 94 cents of every dollar
earned on expenses in 2000, while wheat farms doled out 84 cents for
each dollar of grain sold.
To be more precise, it’s the feedlot side of the cattle business that
is driving down margins in Alberta, said University of Saskatchewan
agricultural economist Richard Gray.
“It’s very common (for feedlots) to have extremely tight margins,” he
said.
But low margins don’t necessarily mean poor profits. A feedlot may only
make a few cents per dollar but it can generate a lot of those dollars,
which translates into higher profits.
Cash receipt numbers for 2000 show that livestock sales in Alberta
amounted to $4.4 billion compared to crop sales in Saskatchewan of $3.4
billion.
Gray said a 10,000-head feedlot selling finished stock for $1,000 per
head generates $10 million in revenue. A grain farm would have to be
massive to approach that kind of sales volume.
But there is another explanation for the census conundrum, aside from
poor feedlot margins.
Bob Prather, head of statistics and data development with Alberta
Agriculture, said there is also a statistical factor exaggerating the
difference in margins between Saskatchewan and Alberta farms.
The census uses a measure called gross receipts to calculate operating
margins, whereas annual farm income forecasts use farm cash receipts.
When 2000 margins are worked out using farm cash receipts, they are
nearly identical for each prairie province, said Prather.
The difference is that gross receipts include farm-to-farm sales. In
Alberta, revenue from farms that sell grain and calves to feedlot
operators is included in receipts, along with revenue the feedlot
generates from fattening those same calves and selling them.
In essence, the revenue generated by the calves and the grain is
counted twice. That’s significant because operating margins are
calculated by dividing profit by sales.
Profits in Alberta are similar under both accounting methods but sales
are higher and margins subsequently smaller under the gross receipts
calculation that the census uses.
Another possible explanation for the margin mystery was suggested by
Paul Murray, chief of Statistics Canada’s farm income and prices
section.
He said the census is “somewhat artificial” in that it only measures a
snapshot in time, when prices of commodities or world markets may have
been upside down.
“Perhaps 2000 just tended that way, but the year before or the year
after might have been different.”
