Farm cash receipts

Farm cash receipts fell to their lowest nine-month level in three years between January and September, as the fallout from mad cow disease slashed revenues for cattle farmers.

In total, farmers received $24.5 billion between January and September from all three sources - livestock and crop receipts and program payments - down 4.5% from the same period of 2002. It was the lowest January-to-September level since 2000. Record program payments were not able to offset declines in livestock and crop receipts.

Revenue from livestock tumbled 12.6% to $11.8 billion, the biggest percentage decline over nine months in more than a decade. Crop receipts fell 4.3% to $9.7 billion, their lowest level since 1995. In contrast, producers received a record $3.0 billion from program payments.

The plunge in livestock receipts was mainly the result of dramatically lower cattle receipts after a single cow in northern Alberta was diagnosed with bovine spongiform encephalopathy (BSE). The subsequent widespread ban on cattle and beef products hammered Canada's cattle industry. Exports of live cattle and beef had fuelled growth in the sector during the last several years.

Crop receipts fell in spite of improved growing conditions this year. Two consecutive droughts in western Canada slashed production and sharply curtailed grain and oilseed inventories by the end of 2002, leaving producers little to sell until the 2003 crop was harvested.

The $3.0 billion in program payments was 50% higher than in the first nine months of 2002 and nearly double the previous five-year average. The increase is a result of record payments delivered through crop insurance programs and Net Income Stabilization Account (NISA), coupled with additional assistance programs provided to help offset the impact of the BSE-related ban.

Farm cash receipts provide an overall measure of gross revenue from farm businesses. They do not account for expenses incurred by farmers. Cash receipts can vary widely from farm to farm because of several factors, including commodities, prices and weather. In addition, the impact of the closure of the US border to Canadian cattle and beef will continue to be reflected in farm financial statistics. The impact on other sectors of the economy, such as meat processing and transportation, is not covered by this report.

Provincially, the largest declines occurred in Alberta (-16.8%) and Saskatchewan (-6.5%), where plunging cattle receipts coincided with declining grain revenues.

Quebec saw the largest gain, with farm cash receipts rising 5.2%, as higher program payments offset a decrease in livestock receipts. Prince Edward Island followed, with revenues increasing 4.1%, as higher crop receipts offset lower livestock revenues.

Livestock: Plunge in cattle marketings, prices

The number of cattle on Canadian farms reached a record high by the end of June in the wake of the ban on Canadian cattle and beef. Cattle receipts fell 36.7% to $3.3 billion between January and September, as marketings and prices both plunged.

Before the BSE-related ban, almost half the cattle sold in Canada were exported as either live animals or meat, with the vast majority going to the United States. In the third quarter, cattle receipts fell nearly 75%, as movement across the border of live cattle and beef products was halted on May 20. In contrast, during the third quarter of 2002, 400,000 head of cattle moved across the border, accounting for $426 million in farm cash receipts.

The analytical article Analysis in brief: Mad cow disease and beef trade (11-621-MIE2003005, free), published November 5, showed that prior to the ban on Canadian cattle and beef, Canada was the third largest exporter of these products in the world. In 2002, this export market was worth about $4.1 billion. The value of these exports in June, July and August dropped to virtually zero.

As of mid-September, Canadian boneless beef from animals younger than 30 months has been allowed into the United States under a permit process. However, the border remains closed to live cattle and calves.

A large portion of the reduction in cattle receipts for the first nine months of 2003 was due to lower slaughter receipts. The number of head sold fell 20.0%, and prices dropped in response to the ban. Between July and September, receipts for slaughter cattle were only one-third of their 2002 levels.

In addition, revenue for calves fell 38.1% to $289 million, as the American border restriction shut off Canada's major market for veal and feeder calves.

However, hog farmers reported cash receipts of $2.6 billion in the first nine months of 2003, up 3.3% from the same period of 2002. Prices slumped 3.5% below the previous five-year average, as farmers shipped a record number of hogs to market.

Crops: Back-to-back droughts still hitting crop producers

The $9.7 billion in crop receipts between January and September was 4.3% below the previous five-year average.

In spite of improved growing conditions this year, previous droughts still had an impact on grain and oilseed receipts. 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.

Low western Canadian production in both 2001 and 2002 helped push feed grain prices higher. This hit the livestock industry hard, as shortages caused by extremely tight grain and forage supplies forced users to import corn from the United States. Just over four million tonnes were imported in 2002, more than twice as much as two years earlier.

Farmers dipped heavily into their grain and oilseed inventories to provide needed revenues and to feed their livestock. As a result, farm stocks dwindled to extremely low levels by the end of 2002, leaving little to be sold in the first half of 2003.

Crop production for 2003 is well above 2002 levels for most crops. Overall deliveries for major grains and oilseeds in the third quarter were higher than in the third quarter of 2002. However, they were still down for the first three quarters in total for 2003, particularly in Saskatchewan and Alberta. Higher prices for most of these crops could not offset reduced marketings.

Hardest hit were producers of barley and wheat (excluding durum). Receipts from barley were cut nearly in half to $237 million, the result of major reductions in marketings, lower Canadian Wheat Board (CWB) payments and lower prices. Despite more normal production in 2003, deliveries were down in the third quarter, as producers built up their stocks.

Revenues from wheat (excluding durum) fell 4.2% to $1.6 billion, as higher prices could not offset reductions in deliveries and lower CWB payments. Canola receipts fell 5.1% to $1.1 billion.

Farmers deferred fewer receipts into 2003, as back-to-back droughts reduced production and lowered marketings in 2002. This led to a 24.4% decline in liquidations to $619 million in the first nine months of 2003, well below the previous five-year average.

Receipts from soybeans and corn rose from the first nine months of 2002. Soybean revenues were up 29.5%, as deliveries and prices both increased. Corn revenues were up 6.7%, as higher prices more than offset lower deliveries. Eastern Canada, where corn and soybeans are predominantly grown, had much better growing conditions throughout 2002.

Program payments shatter 1988 records

Program payments shattered previous record levels by delivering $3.0 billion in the first nine months of 2003, almost $400 million more than the previous record set in 1988.

This increase was the result of record crop insurance payments and NISA withdrawals. Assistance began to flow to producers in response to the BSE-induced border closures late in the second quarter and is continuing.

Crop insurance payments surged to a record $1.3 billion between January and September, most of it paid in the first quarter. This was a $453 million increase over the previous record set in 2002 and more than double the previous five-year average. Elevated payments were in response to the western drought.

NISA withdrawals reached $539 million in the first three quarters of 2003, up $178 million from the previous record in 2002. Payments for income disaster assistance programs reached $284 million, up 17.8%.

Available on CANSIM: tables 002-0001 and 002-0002.

Definitions, data sources and methods: survey number 3437.

Data for the fourth quarter on farm cash receipts will be released on February 24, 2004.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Kim Boyuk (613-951-2510; kimberley.boyuk@statcan.gc.ca) or Gail-Ann Breese (204-983-3445; gail-ann.breese@statcan.gc.ca), Agriculture Division.