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Thursday, May 27, 2004

Net farm income

2003

Net cash income-the difference between a farmer's cash receipts and operating expenses-plunged to its lowest level in more than 25 years in 2003 following back-to-back droughts in previous years and the mad cow crisis.

Net cash income tumbled 43.3% to $4.2 billion, the second consecutive decline. This level was 37.2% below the previous five-year average, from 1998 to 2002, and the lowest since 1977.

Back-to-back droughts in 2001 and 2002 and the diagnosis of a single cow with bovine spongiform encephalopathy (BSE) in northern Alberta last year were among the main factors.

Prairie farmers were hardest hit. Net cash income plunged 72.3% in Alberta, 69.4% in Saskatchewan and 51.2% in Manitoba. Only three provinces recorded gains: Newfoundland and Labrador, Quebec and British Columbia.

Despite record high program payments, lower receipts for crops and livestock dragged down the total farm cash receipts, while farm operating expenses rose 3.7%. Inputs-such as fertilizer and lime, machinery fuel, commercial seed and pesticides-contributed to the higher expenses.

Net cash income can vary widely from one farm to another because of factors such as commodities produced, prices and weather. It does not take into account depreciation or the value of on-farm inventory changes. For details on farm cash receipts in the first quarter of 2004, see today's Farm cash receipts release.

Cash receipts lowest in three years

In total, farmers received $34.1 billion from all revenue sources last year, down 5.8% from 2002. It was the lowest level since 2000, yet was still above the average for the previous five years.


Note to readers

Net cash income measures farm business cash flow (farm cash receipts minus operating expenses) generated from the production of agricultural goods. Net cash income represents the amount of money available for debt repayment, investment or withdrawal by the owner.

Total net income measures the financial flows and stock changes of farm businesses (net cash income minus depreciation plus income-in kind and value of inventory change). Total net income values agriculture economic production during the year that the agricultural goods were produced. It represents the return to owner's equity, unpaid labour, management and risk.

Farm cash receipts measures the gross revenue of farm businesses in current dollars. They include sales of crops and livestock products (except sales between farms in the same province) and program payments. Receipts are recorded when the money is paid to farmers before any expenses are paid.

Farm operating expenses represent business costs incurred by farm businesses for goods and services used in the production of agricultural commodities. Expenses are recorded when the money is disbursed by the farmer.


Revenue from livestock tumbled 11.1% to $16.2 billion, the biggest decline in more than a decade. Receipts for crop producers fell 10.2% to $13.0 billion, the lowest level since 1994.

In contrast, program payments rose 41.6% to reach a record $4.9 billion, shattering the previous record of $3.8 billion in 1992.

Cattle receipts fell by around one-third last year to $4.6 billion, as marketings and prices both tumbled in the wake of the May 20 export ban on cattle and beef products after the diagnosis of a single cow with BSE in Northern Alberta. Receipts from international exports of cattle plunged more than 67% to $572 million. Almost all exports are shipped to the United States, and because of the ban, the access to the US market has collapsed.

In 2002, Canada's export market for cattle and beef was worth about $4 billion, nearly double the 2003 level, according to the article "Mad cow disease and beef trade: An update," published on February 18 in the Analysis in Brief series.

In addition, receipts for slaughter cattle fell nearly 25% to $3.4 billion. Both, prices and the number slaughtered, fell because of reduced international demand for Canadian beef products following the ban. In its wake, the Canadian cattle herd has soared to a record high.

Cattle receipts fell by more than 60% in the third quarter of 2003. But as of mid-September, boneless Canadian beef from animals younger than 30 months was allowed into the United States under a permit process. Receipts for cattle started to creep up, but were still well below normal levels. The border remained closed to live cattle and calves.

In contrast, hog farmers reported cash receipts of $3.4 billion, up 3.2%. The number of hogs sold abroad last year rose by almost 30%, helping to push marketings to record levels, while the average price for the year was similar to the average price for 2002.

On the supplied-managed side, which accounted for just over 40% of livestock revenue in 2003, receipts for milk and cream continued to climb. Revenues from chicken rebounded, while receipts for eggs dipped.

Dairy receipts rose 8.7% to a record $4.5 billion, following a price increase implemented by the Canadian Dairy Commission in February 2003 and an increase in marketings.

Crop receipts in 2003 fell 4.3% below the previous five-year average despite improved growing conditions in Western Canada. Two consecutive droughts slashed production and sharply curtailed grain and oilseed inventories by the end of 2002. Consequently, producers had little to sell until they harvested the 2003 crop.

The 2003 production of most crops surpassed levels in 2002. During the second half of 2003 in particular, higher deliveries were offset by lower prices for most of the major grains and oilseeds, as well as lower Canadian Wheat Board (CWB) payments.

Hardest hit were producers of wheat (excluding durum) and barley. Revenues from wheat (excluding durum) fell 30.7% to $1.8 billion in the wake of lower deliveries and CWB payments.

Farmers deferred fewer grain and oilseed receipts into 2003, as back-to-back droughts reduced production and lowered marketings in 2003. This led to a 22.2% decline in liquidations to $654 million, well below the previous five-year average.

Potato revenues fell by 7.4% to $850 million after reaching a record in 2002. But in general, horticultural crop receipts, including fruits, vegetables, and the floriculture, nursery, and sod industries, increased by more than 4% to nearly $4 billion, 30% of the total crop revenue.

The majority of the 41.6% jump in program payments last year occurred in the form of payments delivered through three separate types of programs: the 2003 Transition Funding Program; assistance programs provided to help offset the impact of the BSE-related ban; and crop insurance programs.

Canadian farmers received more than $1.0 billion through both the 2003 Transition Funding and the BSE-related programs. (The Transition Funding Program was implemented to support the agricultural industry during the period of transition to the new Agricultural Policy Framework.)

Crop insurance payments surged to a record $1.7 billion, a $299-million increase over the previous record in 2002 and more than double the previous five-year average. This jump was the result of both poor growing conditions in 2002 and an increase in acreage insured.

Gross payments under provincial stabilization programs soared 79.8% to $711 million. Net Income Stabilization Account withdrawals continued to climb, reaching $723 million, up $107 million from the 2002 record level. Payments for income disaster assistance programs reached $440 million, up 13.8%.

Crop expenses lead the overall growth in operating expenses

Operating expenses rose 3.7% in 2003 as major crop input, farm labour costs and fuel increased. The largest gains were in Saskatchewan (+7.5%), Quebec (+5.6%) and Manitoba (+5.6%).

Fertilizer expenses experienced the largest increase, rising 18.7% to $2.7 billion, mostly because of higher natural gas prices. Cash wages reached $3.9 billion, and machinery fuel rose to $1.6 billion, following the wake of higher prices and usage.

Commercial seed expenses rose because of higher seed prices resulting from dry conditions in Western Canada, which severely reduced the quality and quantity of seeds for planting in 2003. Pesticide expenses rose to $1.7 billion as a result of higher pesticide usage, particularly in the Prairies, because of grasshopper infestation.

Stabilization premiums hit $182 million, their highest level in seven years, while insurance premiums hit a record $542 million, largely because of adverse conditions in recent years.

In contrast, livestock purchases plunged 25.8% to $1.1 billion as a result of the closure of beef export markets caused by BSE. Commercial feed costs fell to $4.8 billion, after three consecutive annual increases. Feed prices declined as a result of relatively large feed supplies and a stronger Canadian dollar.

Inventories bump up total net income

After reaching an extremely low level in 2002, total net income almost doubled to $2.3 billion in 2003, which was 8.8% above the previous five-year average. Total net income adjusts net cash income for changes in farmer-owned inventories of crops and livestock, depreciation and income-in-kind.

Back-to-back droughts in Western Canada sharply curtailed farm grain and oilseed inventories by the end of 2002. Consequently, the return to a more normal harvest in 2003 helped increase inventories. In the same way, the BSE crisis forced cattle producers to keep their livestock on the farm, causing an increase in inventories.

Since they were the hardest hit by the combination of droughts and the mad cow crisis, Prairie farmers saw the largest increases of their value of inventory changes. Alberta led with the total value of inventory change reaching $1.0 billion, followed by Saskatchewan at $943 million, and Manitoba at $384 million.

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.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Gail-Ann Breese (204-983-3445; gail-ann.breese@statcan.gc.ca) or Paul Murray (613-951-0065; paul.murray@statcan.gc.ca), Agriculture Division.

Net farm income
  Canada N.L. P.E.I. N.S. N.B. Que. Ont. Man. Sask. Alta. B.C.
  $ millions
2002r                      
+ Total farm cash receipts including payments 36,217 80 364 407 424 5,512 8,492 3,855 6,485 8,384 2,214
- Total operating expenses after rebates 28,901 74 312 368 358 4,602 7,233 2,929 4,815 6,308 1,902
= Net cash income 7,316 6 52 39 66 910 1,259 926 1,669 2,076 312
+ Income-in-kind 134 1 1 3 3 45 40 8 12 15 7
- Depreciation 4,522 5 36 51 43 579 1,121 397 912 1,120 257
= Realized net income 2,928 2 18 -9 25 375 179 537 769 971 61
+ Value of inventory change -1,620 0 79 1 18 20 150 -36 -749 -1,118 16
= Total net income 1,308 1 97 -8 43 395 329 501 20 -147 77
2003p                      
+ Total farm cash receipts including payments 34,122 82 354 417 397 5,981 8,344 3,546 5,690 6,999 2,312
- Total operating expenses after rebates 29,971 74 325 379 366 4,860 7,340 3,094 5,178 6,424 1,931
= Net cash income 4,152 8 29 38 31 1,121 1,004 452 512 575 381
+ Income-in-kind 126 0 1 2 2 42 38 8 11 14 6
- Depreciation 4,590 6 36 51 43 607 1,112 426 913 1,139 256
= Realized net income -312 3 -6 -10 -10 556 -71 34 -390 -549 131
+ Value of inventory change 2,658 0 6 1 6 125 147 384 943 1,042 3
= Total net income 2,345 3 0 -10 -3 681 76 418 553 492 134
rRevised data.
pPreliminary data.
Note:Figures may not add to totals because of rounding.



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Date Modified: 2004-05-27 Important Notices