Statistics Canada released its 2019 farm income and debt report this week, and it showed that realized net income of Canadian agricultural producers rose for the first time in three years.
Net income was up 10.4 per cent to $4.9 billion in 2019, but as J.P. Gervais, chief economist of Farm Credit Canada (FCC) points out, this was primarily due to the inclusion of cannabis receipts for the first time.
Farm cash receipts, excluding cannabis, increased 2.9 per cent, similar to the average annual gain over the previous five years of 2.4 per cent. Canadian crop revenues, excluding cannabis, declined 1.1 per cent in 2019 while livestock receipts increased 5.1 per cent to $26.3 billion.
Despite the rising income, collective nationwide farm debt rose by 8.7 per cent, as Statistics Canada reported it at $114.8 billion. Saskatchewan’s farm debt was 9.1 per cent higher than the national average. Although we don’t have statistics on the source of that growth, Gervais says we know that there are some pressures on that income with the difficult years of drought (and floods) Saskatchewan has faced.
2019 was the 26th straight year of farm debt rising — a trend that’s likely going to continue in 2020 due to COVID-19 and expanded lending programs to assist producers through the pandemic’s turbulence.
Gervais says although Statistics Canada and others use the term realized net income, he prefers to use cash income, which is gross revenues minus cash expenses. From a financial point of view, this allows us to look at what we can take out of the farm, and what you can use to invest or pay down debt. “In my mind, it gives us a picture to look at, of what we can use,” he explains.
Notably, Saskatchewan faced the largest decline in realized net income, with a 15.6 per cent reduction, at $311 million, while Manitoba declined $179 million. Gervais says this is the result of a bit of down pressure from crop receipts and less cannabis sales. Gross income was flat, and operating expenses continue to go up, with a notable increase of 3 per cent in operational expenses.
The majority of provinces saw increases in realized net income in 2019, with Alberta, Quebec, British Columbia, New Brunswick, and Prince Edward Island being on the plus side.
As for the first quarter of 2020, overall cash receipts were up 5.5 per cent, but as Gervais notes, we’re likely to see the impact of COVID-19 rear its head in the second quarter in some of the major commodities. According to Statistics Canada:
Lower oilseed receipts moderated the rise in crop receipts. Revenue of canola producers decreased for the second consecutive year, down 7.4 per cent following a 6.5 per cent decline in 2018. Prices fell 9.8 per cent in 2019 in the wake of Chinese import restrictions on Canadian canola seed that began in March 2019. Nevertheless, marketings were up 2.7 per cent as domestic crush reached record highs and lower prices boosted exports to other countries.