Soaring grain and oilseed prices in 2007 created a growing economic divide between grain-dominated provinces and those more livestock-dependent.
Statistics Canada reported May 26 that the Prairies recorded sharp realized net income gains while six provinces saw their farm sectors lose financial ground.
Under the surface of the increase in market receipts, input costs also soared at rates not seen for a decade or more.
And Canadian farm debt increased four percent to a record $54.2 billion, making debt servicing charges one of the fastest growing expense items despite the lowest interest rates in decades.
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Meanwhile, in 2007 Ontario barely squeaked into the black despite total farm cash receipts of $9.3 billion.
Statistics Canada said the disparity continued through the first three months of 2008 as market receipts soared on the Prairies and declined in Ontario.
The federal agency said grain and oilseed prices boosted Saskatchewan market returns to $2.37 billion during the first three months of the year, 44 percent above last year’s level. The overall increase in Manitoba was 16.6 percent to $1.08 billion despite a sharp decline in livestock revenues and 13 percent to $2.23 billion in Alberta.
In Ontario where livestock is more predominant, first quarter market returns dropped $86 million – more than four percent.
Statistics Canada also reported that 2007 was a good year for the Quebec farm economy, although not just because of soaring grain prices.
It said supply managed sectors, which are most concentrated in Quebec, had a good revenue year.
“Supply managed commodities (dairy, poultry and eggs) experienced an 8.5 percent jump in revenues, the largest percentage increase in over 20 years,” Statistics Canada said.
“This occurred as prices rose to help cover mounting production costs.”
By contrast, livestock receipts were diminished by a higher Canadian dollar and the fact that with domestic feed costs rapidly increasing, “more animals (were) shipped to the United States for cheaper feeding (and) domestic slaughter decreased in 2007.”
The end result was that while Alberta, Saskatchewan, Manitoba and Quebec recorded strong realized net income numbers (revenues minus production costs and depreciation,) British Columbia, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland recorded net deficits.
Ontario saw its realized net income figure drop.
The national results were good news for the guardians of tax dollars in Ottawa and provincial capitals.
Program payments in 2007 were almost 10 percent below 2006 levels at $4.1 billion, which is well below the five-year average. Still, program payments were almost $2.5 billion above realized net farm income.
The increase in crop receipts was the largest in 13 years and despite low cattle and hog prices, overall livestock receipts edged up last year because of increases in dairy and poultry revenues.
Federal economists said the increase in feed and fertilizer prices was the largest since 1981, a high-inflation year.
“The surge in grain and oilseed prices hit livestock producers hard as feed costs leaped 21.8 percent,” the federal analysis said. “Fertilizer price hikes, fueled in part by increased ethanol production in the United States, sent fertilizer costs up 21.9 percent. One year increases of this magnitude have not been seen since the late 1970s.”
Statistics Canada also flagged the growing cost of servicing Canada’s record farm debt.
“While gains in interest rates and debt were not large compared with those of the recent past, they translated into a 10.6 percent rise in interest expenses.”
