Finances

Gross farm receipts and expenses both increase
Farm size influences success for many
For farm finances, bigger is better, but not always
Product type also a factor

Gross farm receipts and expenses both increase

Over the five-year period between 1995 and 2000, the prices farmers received for their products declined by 4.6%, while prices they paid for expenses such as fertilizer and fuel increased by 10%. Farmers, squeezed by increasing costs and declining value of many of the products they sold, had to increase farm production to keep the ratio of expenses-to-receipts favourable.

In Canada, farmers spent 87 cents in operating expenses for every dollar in gross farm receipts in 2000. In 1995, it took 83 cents in expenses to earn a dollar in gross farm receipts. (Expenses collected on the census do not include depreciation.)

Total gross farm receipts were $38.3 billion in 2000, while operating expenses reached $33.2 billion. While factors such as the commodities they produced, the prices they received and the weather they had to deal with made each farmer's situation different, in general expenses rose slightly faster than revenues.

Five years earlier, at 1995 prices, receipts were $32.2 billion and expenses were $26.7 billion. Over much of this period, prices for grains and oilseeds fell substantially, while those for cattle rose. Hog prices fell to an alarmingly low level in 1998 before beginning a recovery. The level of program payments from governments to farm businesses also increased.

Farm size influences success for many

The amount of a farm's expenses relative to the dollars it receives in gross farm receipts differs by receipts category. The smallest farms, those with receipts less than $25,000, spent $1.68 in operating expenses for every dollar in receipts. Many farms in this category are hobby farms.

Those in the largest receipts category ($250,000 and over) spent 85 cents for every dollar they received. However, in each of the receipts categories, farmers spent more to earn a dollar in 2000 than they did in 1995.

Only farm operations in the receipts category of $250,000 or more grew in terms of farm numbers over the five-year period. They represented 34,139 farms, an increase of 32.0% from 1995. While they accounted for only 13.8% of all farms in Canada, they had 68.1% of all gross receipts reported for 2000.

For farm finances, bigger is better, but not always

Even though size is important, bigger is not always better. No matter how large or small the farm, some operations in every receipts category have higher expenses than receipts. This reflects the fact that a farmer's costs have grown faster than the revenues from the farm products. Only 25% of farms with receipts less than $25,000 had higher receipts than expenses.

Although this percentage increases as farms grow in size, it was lower in each receipts category in 2000 than in 1995. This was especially true for farms with a high dependence on grains and oilseeds as prices for these crops declined substantially.

Receipts category	Farms with gross farm receipts greater than farm operating expenses
	1995		2000
	Number	Percentage	Number	Percentage
$0 - $24 999	35,160	29.9%	24,070	25.0%
$25,000 - $99,999	62,481	76.3%	46,009	66.3%
$100,000 - $249,999	46,263	90.3%	39,606	84.1%
$250,000 +	23,446	90.3%	30,040	88.0%
All farms	167,350	60.5%	139,725	56.6%

Product type also a factor

Farms also differ by the type of product. Dairy farms spent the least in operating expenses per dollar of receipts, at 75 cents. Cattle farms, on the other hand, spent the most, at 94 cents. These operations are often run as low-margin, high-volume businesses. Hog farms fell in the middle, spending 84 cents for every dollar in receipts. Crop farms (including field crop, grain and oilseed, and wheat farms) averaged 86 cents in expenses for every dollar in receipts.