Fizzling farm income a long-term issue

Farm cash receipts in Canada sank 1.6 percent for the first nine months of 2018, compared to the same period in 2017. It was the first decline in farm cash receipts, for the first three quarters of the year, since 2010.

The 1.6 percent drop isn’t a shock and may be a signal of future trends, said an economist with Farm Credit Canada.

In short, the boom in Canadian agriculture may be over.

“On the revenue side, it was to be expected that at one point we would be slowing down a little bit,” said J.P. Gervais, chief agricultural economist with FCC. “If you think about the next 10 years, I don’t think we’ll repeat the last 10. Those next 10 are still going to be good…. I’m still very optimistic… but I don’t think we can replicate the last 10 in terms of income (growth).”

In late November, Statistics Canada reported that farm cash receipts were $45.3 billion for the first nine months of 2018, down from $46 billion in 2017. Canola was responsible for a large chunk of the decline. Canola saw a $564.5 million drop in the three quarters of 2018, partially because of rail disruptions and a cool and wet harvest in 2017.

Farm revenue from peas and lentils also took a hit.

“Pulse crop receipts showed significant decreases as India, the largest export destination, placed tariffs on these crops beginning in November 2017,” Stats Can said in its report.

A 1.6 percent drop in farm cash receipts is discouraging news, but Canadian farmers are doing better than their American neighbours. The U.S. Department of Agriculture has predicted that net farm income in that country will sink by 13 percent compared to 2017.

A drop in overall revenue in 2018 doesn’t mean that Canadian farm revenue will decline in future years. However, the incredible pace of growth over the last decade is probably at an end, Gervais said.

In 2009, farm cash receipts in Canada were $44.6 billion.

By 2017, they had hit $62 billion — a jump of 39 percent in less than a decade.

Global demand for food will remain strong and Canada is well positioned to supply that demand, but 40 percent growth in farm revenue over the next decade seems unlikely.

“If you look at the first nine months of 2018, versus the last 10 years, I think it paints a pretty realistic picture of where we are in the industry,” Gervais said.

Despite that 2018 data, Statistics Canada numbers indicate that farmers have been doing well compared to most Canadians:

  • In 2006, the median total income of a farm household in Canada was $65,088, 2.6 percent higher than the typical household.
  • In 2016, the median for a farm household was $82,456 — 17.3 percent higher than the median household income of $70,275.
  • For grain farmers, the median household income in 2016 was $90,861 — 29 percent higher than the median household.

On the negative side, the cost of farming continues to rise. In 2017, based on StatsCan data, farm operating expenses were $47.4 billion, an increase of three percent compared to 2016.

Growth in farm revenue is likely to slow over the next decade, but farm expenses will continue to climb.

“Farm expenses, realistically, they’re not coming down,” Gervais said.

Canadian farmers will need to keep a close eye on costs and at the same time focus on higher production. Gervais said revenue gains for the next 10 years will likely come from production gains, not rising commodity prices.

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