Net farm income

Realized net income for Canadian farmers fell in 2005 to its lowest level since 2003, following two years of drought and more than two years of battling trade restrictions because of bovine spongiform encephalopathy (BSE).

Realized net income (the difference between a farmer's cash receipts and operating expenses minus depreciation, plus income in kind) declined 7.7% to $2.1 billion. This figure was 8.0% below the previous five-year average (2000 to 2004).

Newfoundland and Labrador, Prince Edward Island, Ontario and Saskatchewan recorded gains in realized net income in 2005. In Alberta, realized net income dropped to half of the previous year's level, and in Manitoba it declined by almost 40%.

Total farm cash revenue from livestock and crop receipts and program payments rose 1.2% in 2005. Higher revenues from cattle and calves more than offset a decline in revenues from crops and hogs. Crop producers saw their receipts fall 6.9%, largely because of depressed prices.

Meanwhile, farm operating expenses rose 1.7% in the wake of higher costs of machinery fuel, fertilizer and livestock purchases.

Realized net 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 the value of on-farm inventory changes. It is a measure of farm business income, not farm household income. For details on farm cash receipts in the first quarter of 2006, see the following release in today's Daily.

Higher revenues for cattle push up market cash receipts

Market cash receipts, or revenues from the sale of crops and livestock, increased 0.9% to $32.0 billion last year. The main contributor was higher revenue for cattle, particularly during the last half of the year.

Cattle producers led the growth as their receipts surged 26.6% to $6.4 billion. This was still 1.7% below the previous five-year average. This surge was due, in large part, to the resumption on July 18, 2005 of trade in live cattle, under 30 months of age, with the United States.

Receipts from international trade in live cattle and calves went from zero in 2004 to $657 million during the last half of 2005. This represented 3.6% of total livestock revenues and about 10% of total cattle and calf receipts. The reopening of the border also helped bolster prices for cattle and calves marketed domestically. Average slaughter prices for cattle rose 8.4%, while the average price of feeder animals rose 32.5% from 2004.

Revenues from hogs fell 8.1% from 2004 to $3.9 billion, driven by lower prices and a decrease in marketings for domestic slaughter and international exports. Despite the decline, hog receipts were still 8.4% above the previous five-year average.

Supply-managed commodities accounted for almost 40% of total livestock revenue in 2005. Receipts for chicken and turkey grew, while revenues from eggs declined. Receipts for milk and cream rose 5.3% on the strength of a 6.6% increase in price.

After rebounding in 2004, crop receipts fell 6.9% in 2005. They were 2.2% below the previous five-year average. Abundant world grain supplies, including lower quality domestic grains from the 2004 harvest as well as a strong Canadian dollar, depressed prices, in some cases to near-record lows.

Receipts from wheat (excluding durum) fell 22.8% to $1.9 billion, as prices plunged 22.9% below 2004 levels and 28.4% below the previous five-year average. Farmers received $1.9 billion for canola, down 13.7% from 2004. Deliveries rose 14.2% in 2005, while prices fell 24.4%.

In total, farmers received $37.0 billion from all three sources (livestock and crop receipts and program payments), up 1.2% from the previous mark set in 2004.

However, program payments rose 3.1% to a record $5.0 billion, representing 13.6% of total gross revenue. It was the third consecutive year in which program payments hit record highs, and the 2005 level was 28.0% above the previous five-year average.

Farmers received large payments through the Canadian Agricultural Income Stabilization program and the Farm Income Payment program. These offset lower withdrawals from the Net Income Stabilization Account and reduced provincial stabilization payments. Federal and provincial programs have responded to difficulties in the cattle, grains and oilseeds sectors with payments to affected producers.

Operating expenses: Soaring energy prices had big impact

Farm operating expenses rose 1.7% nationally and were 6.3% above the previous five-year average. Soaring energy prices were the biggest factor. Most other expense items also rose, but a large decrease in feed costs dampened the increase.

Expenses increased in all provinces except in Quebec, where they fell 2.0%, and Manitoba, where they edged down 0.7%. Elsewhere, the increases varied from 0.8% in Newfoundland and Labrador to 5.3% in British Columbia.

Almost two-thirds of the increase in gross operating expenses came from record high fuel costs, which were 20.2% above the levels in 2004.

Cattle and calf prices rose following the reopening of the US border to trade in live cattle, resulting in a 25.9% gain in the purchase costs of livestock.

Cash wages continued their long-term increase, reaching $3.9 billion in 2005, up 2.6% annually compared with a 1.7% increase in 2004.

Higher prices also led to a 3.1% increase in fertilizer expenses.

With increasing debt load and stabilizing interest rates, interest expenses climbed 4.2%, the first increase since 2000.

In contrast, lower grain and oilseed prices resulted in reduced feed prices. Feed costs fell 11.6% to $4.2 billion, the lowest level since 2000.

Lower farm inventories reduce total net income

Following two years of increases, total net income fell 35.8% to $2.6 billion in 2005. Total net income adjusts realized net income for changes in farmer-owned inventories of crops and livestock.

Despite an increase of on-farm grain and oilseed inventories to well above 10-year averages, lower grain and oilseed prices in 2005 reduced the increase in the value of crop inventories compared to 2004.

A small drop in cattle and calf inventories also moderated the rise in values.

Available on CANSIM: tables 002-0001, 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.

The publications Net Farm Income: Agriculture Economic Statistics, Vol. 5, no. 1 (21-010-XIE, free), Farm Cash Receipts: Agriculture Economic Statistics, Vol. 5, no. 1 (21-011-XIE, free), Farm Operating Expenses and Depreciation Charges: Agriculture Economic Statistics, Vol. 5, no. 1 (21-012-XIE, free), Value of Farm Capital: Agriculture Economic Statistics, Vol. 5, no. 1 (21-013-XIE, free) and Farm Debt Outstanding: Agriculture Economic Statistics, Vol. 5, no. 1 (21-014-XIE, free) are now available online from the Our products and services page of our website.

For more information, contact Bernie Rosien (613-951-0753, bernie.rosien@statcan.gc.ca) or Gail-Ann Breese (204-983-3445; gail-ann.breese@statcan.gc.ca), Agriculture Division.