Highlights

2008 Overview

1. In 2008, the average total income of Canadian farm families was $100,031, up 6.8% from 2007, according to data from personal income tax returns. After adjustment for capital cost allowance (CCA), their average total income rose 6.5% to $85,156.
2. The growth in farm families’ average total income in 2008 reflects increases in both average total income from off-farm sources and average net farm operating income. Off-farm income accounted for 78.5% of their total income, down 1.8 percentage points from 2007. It was the first time since 2001 that the proportion of off-farm income was down, and as a result, the proportion of farm-derived income rose.
3. Average off-farm income totalled $78,475 in 2008, up 4.3% from 2007, reflecting growth in most of its major components. Other off-farm income (+17.7%) posted the largest gain relative to 2007, followed by investment income (+7.2%), pension income (+5.0%) and income from off-farm employment (+3.3%). Only government social transfers shrank (-1.0%). Average net farm operating income rose 16.6%, as average net market income continued to recover in 2008.

1. Average net market income jumped 66.2% to $14,532 in 2008, comparable to the levels observed before the bovine spongiform encephalopathy (BSE) crisis. As in 2007, the main factor behind the increase was the rise in average revenues from grain and oilseed sales. Higher revenues from net cash advances, custom work and machine rental, poultry and egg sales, and forage crop sales also contributed to the advance in average net market income. However, the growth in average net market income was moderated by lower average hog revenues and higher average operating expenses. Average operating expenses rose in the wake of higher crop expenses (namely fertilizer and lime, and pesticides), net fuel expenses for machinery, truck and auto, feed, supplement, straw and bedding expenses, and general expenses.
2. Average net program payments to farm families dropped 27.9% to $7,023 in 2008. This decline was partly attributable to an improvement in oilseed and grain prices.

Income of farm families by farm type

1. The average total income of families specializing in oilseed and grain farming grew 11.8% to $114,855 in 2008. This gain was the result of a 5.2% increase in average off-farm income and a 32.6% increase in average net farm operating income, which rose for the third consecutive year. As was the case in 2007, average net farm operating income climbed, as the gain in average net market income largely offset the decline in average net program payments. Driven by higher average revenues from all major grains and oilseeds, particularly canola, wheat, barley and grain corn, average net market income of these families more than doubled, rising from $13,713 in 2007 to $28,784 in 2008. Higher oilseed and grain prices and a good harvest helped these families to cope with rising input costs.
2. Revenues from grains and oilseeds benefited from higher prices. On average, grain and oilseed prices remained well above the 2007 levels, as strong demand and tight world supplies continued to drive prices upward in the first part of 2008. Subsequently, prices retreated from their summer peaks, as global stocks were partially replenished by increased production.
3. While grain and oilseed producers and their families continued to benefit from strong grain and oilseed prices, many livestock producers and their families, notably those in the beef cattle and hog sectors, continued to face serious challenges arising from high input costs and reduced livestock prices due largely to the strong Canadian dollar vis-à-vis its American counterpart in the first part of 2008. Furthermore, they faced market access challenges such as the mandatory Country-of-Origin Labelling (COOL) regulations ¹  in the United States, which created uncertainties in the livestock exports.
4. The average total income of families primarily engaged in beef cattle farming rose 3.4% to $86,452 in 2008, reflecting gains in both average net farm operating income and average off-farm income. Struggled with a strong dollar and increasing feed costs, these families experienced a net market income loss for the sixth consecutive year, but the loss continued to shrink and went from $4,459 on average in 2007 to $2,969 in 2008. Combined with a 1.6% increase in average net program payments, the improvement in average net market income contributed to push average net farm operating income of these families up 29.8% from 2007 to $7,211. Average off-farm income of these families rose 1.5%.
5. Combined with average operating expenses that remained virtually unchanged, higher average revenues from grains and oilseeds, forage crops, and custom work and machine rental, supported the improvement in these families’ average net market income. Average operating expenses remained relatively stable, as decreases in cattle purchases and custom work and machine rental expenses outpaced increases in feed and net fuel expenses.
6. After rebounding slightly in 2007, the average total income of families running a hog and pig farm edged down 3.1% to $75,772 in 2008, as the 8.6% rise in average off-farm income could not compensate for the 22.7% decline in average net farm operating income. Largely hit by increased production costs, in particular feed grain costs, and market uncertainty, these families saw their average net market income drop from an average loss of $11,581 in 2007 to a loss of $37,688 in 2008. Other factors in the rise of average operating expenses were crop expenses, net interest expenses, miscellaneous expenses, net fuel expenses, marketing expenses and hog purchases. Average revenues from hog sales registered by families specialized in hog production increased 6.4% but this trend does not reflect the trend observed for total revenues from hog sales, which went down 14.4%. ² 
7. Revenues from live hog exports went down as both prices and marketings fell from 2007 levels, while revenues from domestic slaughter hogs increased due to higher marketings. Strong hog production in the U.S. and a high Canadian dollar contributed to maintain low hog prices in 2008. Hog prices have been struggling to improve from lows reached in late 2007, when producers faced rising feed grain costs, a higher Canadian dollar and abundant North American hog supplies.
8. Rising input costs, due partly to higher feed grain prices and market uncertainty, and soft slaughter prices continued to squeeze profit margins of families in the hog sector in 2008. The cost-price squeeze faced by these families along with the implementation of U.S. COOL legislation and the uncertainty over market conditions have led to farm restructuring and barn and farm closures. Provinces that relied on exports to the US or that lost slaughter capacity were most affected. ³  With low or even negative profit margins, producers are leaving the industry. In 2008, many hog producers also took advantage of the federal Cull Breeding Swine Program ⁴  to reduce the size of their breeding herd. At January 1, 2009, Canadian hog producers had reported their inventories at 12.2 million, down 11.8% from the previous year. ⁵ 
9. Average net program payments to families in the hog sector were up 47.6% from 2007 to $60,347.
10. Families running a poultry and egg farm and those running a dairy farm posted an increase in average total income of 7.6% (to $119,004) and 5.8% (to $111,855), respectively. In both cases, advances in average net farm operating income and average off-farm income contributed to the gain. As in 2007, average net farm operating income advanced, as prices in supply-managed commodities increased to help cover mounting production costs.
11. As in the case of families operating a hog and pig farm, average total income declined for families engaged in other vegetable (except potato) and melon farming (-5.1%), potato farming (-2.9%), and greenhouse, nursery and floriculture production (-0.9%) in 2008. Families specializing in other vegetable and melon farming saw decreases in both average net farm operating income and average off-farm income. The decline in the average total income was due to lower average net farm operating income for families specializing in potato farming and to lower average off-farm income for families specializing in greenhouse, nursery and floriculture production.

Income of farm families by farm typology group

1. Families operating a business-focused farm (i.e., a small, medium-size, large or very large farm) averaged $126,097 in total income, up 7.1%, while farm families on a pension, lifestyle or low-income farm earned $82,217 on average, up 5.5%.
2. Farm families in all farm typology groups saw their average total income increase in 2008, with families operating a medium-size farm enjoying the biggest gain. Their average total income grew 10.7% to $119,415 in 2008. Increases in both average net market income (+40.0%) and average off-farm income (+12.2%) compensated for the 39.6% drop in average net program payments.

1. Families operating a pension farm or a small farm had advances in average total income of 6.0% and 5.9%, respectively. In both cases, increases in average net market income and average off-farm income offset the decline in average net program payments.
2. After posting increases in average total income that exceeded the national average in 2007, families operating a large or a very large farm experienced more modest gains in average total income in 2008. For families operating a large farm, average total income rose 2.3% to $125,372, as a 31.0% jump in average net market income overrode declines in average off-farm income (-0.5%) and average net program payments (-46.2%). Families operating a very large farm were in a similar situation, as their average total income edged up just 0.7%, as a 28.7% increase in average net market income offset decreases in average off-farm income (-13.7%) and average net program payments (-18.4%).
3. Families operating a very large farm decreased their dependence upon off-farm income by 5.7 percentage points from 2007. The proportion of average total income derived from off-farm sources fell from 39.7% in 2007 to 34.0% in 2008.
4. The second largest decrease in off-farm income share was posted by families operating a small-size farm. Off-farm income accounted for 90.7% of their total income in 2008, a decrease of 1.6 percentage points from 2007. The share of income as a percentage of total income also went down for families operating a large farm (-1.3 percentage points to 46.9%) and for families operating a pension farm (-0.5 percentage points to 87.7%). The share increased for all other farm typology groups.

Income of farm families by province

1. In 2008, the average total income of farm families was up in every province, except in British Columbia (-4.8%) and in New Brunswick (-0.6%). The only provinces whose growth rates for average total income were above the national average were Saskatchewan (+11.9%) and Newfoundland and Labrador (+9.3%).
2. Saskatchewan’s 11.9% growth in average total income between 2007 and 2008 topped Alberta’s and Manitoba’s gains of respectively 6.0% and 5.7%. High grain and oilseed prices helped families in the Prairies to cope with rising input costs. Average net market income more than doubled (+105.7%) in Saskatchewan. It increased 94.9% in Manitoba and 84.2% in Alberta. Higher average off-farm income, especially in Saskatchewan, also contributed to the rises in average total income.
3. As a result of that growth, Saskatchewan’s farm families moved up to third place in average total income. Ontario’s farm families remained second, as their average total income climbed 6.2% to $99,262. Alberta’s farm families continued to head the list with an average total income of $122,845. For a second consecutive year, they were, on average, the only farm families whose average total income surpassed the national average.