Realized Net Farm Income Down in 2022 as Expenses Rise 

After two years of big gains, realized net farm income for Canadian farmers fell in 2022, undermined by rising expenses. 

A Statistics Canada farm income report Thursday pegged national realized net farm income for this past year at $12.5 billion, down 9.5% from a year earlier. The decline follows a nearly 51% increase in 2021 and a 79.1% jump in 2020. (Realized net income is the difference between a farmer's cash receipts and operating expenses, minus depreciation, plus income in kind). 

Although total farm cash receipts were up 14.8% to $95 billion in 2022, that increase was more than offset by 21.2% increase in expenses to $72.5 billion, as farmers faced higher costs for key agricultural inputs, including fertilizer, feed and fuel. It marked the largest year-over-year increase in farm expenses since a 22% jump in 1974 and easily topped the previous year’s increase of 9.6%. 

For farm cash receipts – which include crop and livestock revenues, as well as program payments – it was the second straight year of strong year-over-year growth, coming in nearly unchanged compared to the 14.7% gain recorded in 2021. Broad gains in commodity prices helped push receipts higher, StatsCan said, noting that most crop prices continued the upward trend seen since the beginning of the COVID-19 pandemic, while livestock prices built on the gains made in 2021.  

Crop revenues rose 15.4% to $54.1 billion in 2022 on the second straight year of higher average prices for all major grain and oilseed commodities. The increase in crop receipts in 2022 followed a 10.9% gain in 2021 and a 15.2% rise in 2020.  

Meanwhile, livestock receipts climbed 12.1% to $33.6 billion on gains across the cattle, dairy, poultry and hog sectors. Program payments increased by 23.6%, reaching a total of $7.3 billion. More than four-fifths of the increase in total direct program payments was attributed to higher crop insurance payments across the Prairies, where losses related to the 2021 drought continued to trigger payments, StatsCan said. 

In terms of crop revenues, higher wheat and canola prices drove the bus. Farm cash receipts for wheat (excluding durum) increased by 28.8% in 2022 to $9.3 billion. The entire increase in wheat revenues was driven by higher prices (+41.7%), as marketings fell 9.1%. Canola receipts increased by 13.4% to $13.7 billion, as prices rose 38.9% from their average 2021 level – enough to more than offset an 18.4% decline in marketings. 

For livestock, cattle receipts increased by 16.5% to $10.8 billion, primarily because of a rise in slaughter cattle receipts (+15.7%). Hog receipts were up 4.4% to $6.5 billion. The supply-managed sector, which accounted for just over two-fifths of total livestock receipts, saw receipts grow 12.7% to $14.1 billion in 2022. 

Fertilizer was the primary culprit in driving farm expenses higher in 2022, climbing 61.5% to $11.9 billion. Fertilizer prices began to escalate in early 2021 and have continued to rise since then. Russia's invasion of Ukraine added more upward pressure to fertilizer markets already stressed by natural disasters and high natural gas prices. In response to the invasion, Canada applied sanctions that included a 35% tariff on most goods coming from Russia, including fertilizers. 

Machinery fuel expenses increased by 58.6% to $4.4 billion in 2022, a rise StatsCan blamed on the reopening of economies following the Covid 19 pandemic as well as the Russian invasion of Ukraine.  

Commercial feed expenses for livestock producers were higher as well, rising 20.6% to $11.5 billion in 2022. The 2021 drought in Western Canada caused pastures to suffer and limited the amount of hay and grain feed that could be stored on farms or purchased from other producers. Alberta, home to many of Canada's largest feedlots, imported record amounts of corn in 2022. 

Saskatchewan ($4.5 billion) had the highest realized net income in 2022, followed by Alberta ($3.3 billion) and Ontario ($2.3 billion). 

Source: DePutter Publishing Ltd.

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