Net farm income

Net cash income - the difference between a farmer's cash receipts and operating expenses - tumbled 11.0% to $7.2 billion in 2002 after setting a record high in 2001.

Cash receipts fell for the first time since 1998 in the wake of back-to-back droughts, while higher feed grain costs drove up operating expenses. Still, net cash income was 12.4% above the previous five-year average, from 1997 to 2001.

Western farmers experienced one of the poorest growing seasons in the past quarter-century in 2002. The situation for some growers in Alberta and Saskatchewan was worse than in the Depression of the 1930s.

Total farm cash receipts from the sale of agricultural commodities and from program payments fell 0.8% in 2002 to $36.0 billion. Operating expenses rose 2.1% to $28.8 billion, the smallest gain since 1998. (Data are revised from preliminary figures released in The Daily on May 27.)

Farmers drew heavily on their crop inventories to support sales in 2001 and 2002, as adverse weather conditions cut grain and oilseed production substantially. As a result, year-end stocks were at their lowest levels since 1988.

Net cash income can vary widely from one farm to another because of factors such as commodities produced, prices and weather. See today's "Farm cash receipts" release for more information on the impacts of last year's extreme weather conditions and of the diagnosis of a cow in northern Alberta with mad cow disease on farmers' revenues in the first three quarters of 2003.

Cash receipts: Livestock prices weaker, program payments slump

Overall, for 2002, total farm cash receipts ($36.0 billion) were still 13.2% higher than the previous five-year average.

Livestock receipts fell 3.9% to $18.2 billion, the first decline since 1998, as prices for major commodities slumped after peaking in 2001. Despite the decline in 2002, livestock receipts were still 13.6% above the previous five-year average.

Abundant supplies of red meat on the North American market and higher feed grain costs put a downward pressure on cattle and hog prices. This followed several years of substantial growth in cattle and hog production.

In contrast, total crop receipts went up 5.8% to $14.4 billion, as higher prices across the country more than offset lower deliveries for the major grains and oilseeds. Farm stocks of major grains and oilseeds dwindled to extremely low levels by the end of 2001, primarily as a result of the drought that summer. This led to reduced deliveries in the first part of 2002.

As drought hit large parts of Saskatchewan and Alberta for a second consecutive year in 2002, deliveries for major grains and oilseeds continued to decline.

Program payments fell for the first time since 1997, falling 8.9% to $3.4 billion. This occurred despite record crop insurance payments resulting from poor growing conditions and an increased acreage insured. These payments continued at record levels into the first quarter of 2003.

Total payments remained 54.7% above the previous five-year average. Most of the decline occurred because of the expiry of one-time emergency assistance payments implemented in 2001.

Operating expenses up in every province except Alberta

Farmers in every province experienced increases in operating expenses, except in drought-stricken Alberta, where expenses fell 3.2%.

Tight supplies of grains put upward pressure on prices, and boosted the cost of commercial feed by 20.0% to $5.2 billion. Purchases of livestock and poultry declined 19.1% to $1.5 billion in reaction to higher feed expenses and lower grain supplies.

For crop growers, the drought resulted in some lower expenses, the largest declines occurring in machinery fuel, fertilizer and lime, and pesticides.

However, the drought was a big factor in a 28.1% increase in premiums for crop and hail insurance. Farmers purchased insurance for more of their crops, at higher levels of protection.

Total net income: Lowest level in more than 30 years

Total net income, which adjusts net cash income for changes in farmer-owned inventories of crops and livestock, depreciation and income-in-kind, plunged to a revised $1.3 billion in 2002, the lowest level in more than 30 years.

Total net income can fluctuate substantially with large swings in grain production. Last year's production season, one of the worst in the past 25 years, forced Canadian farmers to empty their bins to their lowest levels since 1988.

Hardest hit were producers in Alberta and Saskatchewan, who recorded negative total net income. In 2002, Canadian producers experienced the largest decline in the value of farmer-owned crop inventories, which fell by $1.5 billion.

The drought also took its toll on cattle producers, who trimmed their herd size by 4.3% in the wake of higher feed prices and lower supplies. Alberta, the largest cattle producer, was hardest hit, as its cattle herd plunged 7.9%.

Available on CANSIM: tables 002-0003, 002-0005, 002-0007 to 002-0009, 002-0012 and 003-0025.

Definitions, data sources and methods: survey numbers, including related surveys, 3436, 3437, 3439, 3471, 3472, 3473 and 3474.

Preliminary data for 2003 on net farm income will be released on May 27, 2004.

For more information, contact Bernie Rosien (613-951-2441; bernie.rosien@statcan.gc.ca), Agriculture Division.