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Agriculture value added account

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The Daily


Wednesday, January 16, 2008
2006 (revised)

Net value added for agriculture fell for the second consecutive year in 2006 to its lowest level since 1998, primarily as a result of declining farm inventories and lower program payments.

Net value added dropped 17.6% to $8.2 billion in 2006, well below the previous five-year average of $10.1 billion, which included a record $11.4 billion in 2004. Newfoundland and Labrador, Prince Edward Island, New Brunswick and Manitoba were the only provinces to record gains.

Net value added measures agriculture's contribution to the national economy's production of goods and services created in a particular year. It is derived by the total value of agricultural sector production less the related annual cost of production (expenses on inputs, business taxes and depreciation) plus net direct government payments.

Net value added is distributed to the various factors of production, including rent to non-operator landlords, interest to lenders, wages and profits.

Total family wages were up 7.7% over 2005 to $1.6 billion, whereas corporation profits and unincorporated operator returns were down 86.1% and 102.3% respectively. Interest charges were up 16.4% and accounted for 33% of net value added in 2006, while non-family wages accounted for 29%.

The value of agricultural production (the gross output of the agricultural sector) fell 4.9% in 2006 to $44.5 billion, primarily as a result of a large decline in the value of inventory change along with a slight drop in sales of agricultural products and lower program payments. This level was 3.1% below the previous five-year average for the period between 2001 and 2005.

Overall sales of agricultural products edged down 1.2% to $38.2 billion, as lower sales to other farms offset an increase in sales to other sectors. This was 1.4% below the previous five-year average which was dragged down by back-to-back droughts in 2001 and 2002 as well as the closure of the US border to live cattle exports.

While sales of agricultural products to other farms declined 15.2% in 2006 to $5.9 billion, sales to other sectors rose 1.9% to $32.3 billion. The slight increase in sales to other sectors was due to higher revenues from crops, which jumped 7.9% to $14.5 billion, as prices began to recover from their 2005 levels. Tempering the increase in sales to other sectors were weak hog prices, which pushed livestock receipts down 2.5% in 2006.

After three consecutive years of increases, program payments fell to $4.5 billion, 8.1% below the record level of 2005. Despite the drop, the 2006 level was 3.7% above the previous five-year average. Certain programs linked to cash flow problems and difficulties in the cattle sector were terminated in 2006, including the Farm Income Payment Program and bovine spongiform encephalopathy-related programs. Crop insurance payments also played a role, declining 21.1%, as better growing conditions prevailed in 2006. However, new programs including the Grains and Oilseeds Payment Program and the Canadian Agricultural Income Stabilization Inventory Transition Initiatives helped to prevent a precipitous fall in payments.

The value of inventory change was negative $849 million in 2006, the first negative value since 2002, largely as a result of the conversion of on-farm stocks of canola and durum wheat into market deliveries, and lower stocks of feed grains.

Declining on-farm stocks of livestock were also a major contributor to the negative value of inventory change in 2006. Cattle inventories fell 3.6% in the wake of renewed live cattle exports to the United States, while hog inventories declined 1.3%.

Despite the large negative value of inventory change in 2006, on-farm stocks remained at very high levels as bountiful harvests in recent years had brought stocks up to record or near-record levels by the end of 2005.

As a result of the release of data from the 2006 Census of Agriculture on May 16, 2007, estimates of the agriculture value added account and other data contained in the Agriculture Economic Statistics series are being revised, where necessary. The complete set of revisions will be announced in a future release of the series in The Daily.

Available on CANSIM: table 002-0004.

Definitions, data sources and methods: survey number 5030.

The publication Agriculture Value Added Account: Agriculture Economic Statistics, January 2008, Vol. 6, no. 2 (21-017-XWE, free) is now available online. From the Publications module of our website, under Free Internet publications, choose Agriculture.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Stephen Boyd (613-951-1875; stephen.boyd@statcan.gc.ca), Agriculture Division.