Sharper Rise for 2021 Canadian Net Farm Income 

Canadian realized net farm income was up even more sharply in 2021 than previously reported, as strong crop and livestock prices countered rising input costs and the drought-reduced Prairie harvest. 

A Statistics Canada report Monday pegged 2021 realized net income for Canadian farmers at $13.7 billion, up 49.8% from a year earlier. That is slightly above the 46.4% increase StatsCan originally reported back in May, although still well below the 2020 gain of just over 70%. In 2019, realized net farm income crept up just 5.1%. 

Realized net income is the difference between a farmer's cash receipts and operating expenses, minus depreciation, plus income in kind. 

Farm cash receipts - which comprise crop and livestock revenues, as well as program payments - rose 15.3% to $83.2 billion in 2021, the largest year-over-year gain since a 16.1% increase in 1981. However, total farm operating expenses (after rebates) also increased by the most in 40 years in 2021, rising 10.5% to $60.3 billion. 

But despite increased producer outlays for key inputs, such as fertilizer, fuel, and livestock feed from their 2020 levels, receipt growth was still strong enough to push net income higher. Most crops saw price increases and livestock prices rebounded from their 2020 lows. The drought in Western Canada also led to increased crop insurance payments. 

In the wake of high crop prices and crop insurance payouts, Saskatchewan ($5.6 billion) had the highest realized net income in 2021, followed by Alberta ($3.1 billion). Realized net farm income amounted to $1.6 billion in Manitoba and $1.9 billion in Ontario. 

Total national crop revenues rose 11.9% to $47.3 billion in 2021 on higher prices for all major grain and oilseed commodities. This increase followed a 15.2% gain in 2020 and a 3.5% rise in 2019. 

Livestock receipts climbed 13.4% to $30 billion, on the strength of hog and cattle receipts. The increase followed a 0.5% decline in livestock receipts in 2020, when the COVID-19 pandemic disrupted the meat processing supply chain. In the wake of the Western Canada drought, total direct payments to Canadian producers increased by 71.8%, reaching a total of $5.9 billion.  

On the crop side, canola receipts increased by 17.8% to $12.1 billion. Canola prices rose 43.3% from their average 2020 level, more than offsetting a nearly 18% or 4-million tonne decline in marketings due to the Prairie drought which slashed yields and production. Meanwhile, wheat (excluding durum) farm cash receipts increased by 16.6% to $7.2 billion, as a 28.9% increase in prices blunted a 9.6% fall in marketings. Together, the increase in canola and wheat (excluding durum) prices accounted for 56.6% of the growth in crop receipts.  

Meanwhile, corn receipts jumped more than 28% in 2021 to $2.9 billion, but soybean returns eased 4.6% to $3.1 billion. 

Cannabis returns - which can skew overall crop returns higher or lower, came in at $3.3 billion in 2021 - up 11.7%. Excluding cannabis, crop receipts increased by $4.7 billion to a more modest $44 billion. 

As for livestock, hog receipts jumped 32.3% to $6.3 billion in 2021 as a result of strong exports and prices. Prices rose 29.1% for the year, while marketings edged up 2.5%. Cattle receipts increased 11% to $9.2 billion, primarily due to a rise in slaughter cattle receipts (+14.5%). The number of cattle slaughtered increased by 5.6%. 

The supply-managed sector, which accounted for just over 40.0% of total livestock receipts, saw receipts grow 7.5% to $12.5 billion in 2021. A 15.8% rise in receipts for chickens for meat represented just over half of the increase. 

More than 80% of the increase in total direct program payments in 2021 was the result of higher crop insurance payments in Saskatchewan and Alberta, where drought-related losses triggered higher payments. On the other hand, livestock insurance program payments fell sharply (-98.5%), as both cattle and hog prices rebounded from lows recorded at the onset of the pandemic. 

On the other side of the ledger, fertilizer expenses for Canadian farmers increased by 29.3% to $7.3 billion in 2021, as a combination of factors led to the price run-up, including strong crop prices, supply chain issues related to the pandemic, high natural gas prices, and sanctions or duties against Russia and Belarus. 

Commercial feed expenses for livestock producers increased by 23% to $9.6 billion in 2021, mainly due to the Prairie drought which led to tight feedgrain supplies. Machinery fuel expenses increased by 24.5% to $2.8 billion in 2021, as prices moved higher in the wake of lessening pandemic restrictions. 

But while national realized net farm income managed to move higher in 2021, the Prairie drought did weigh on total net income, which represents realized net income adjusted for changes in farmer-owned inventories of crops and livestock.  

Total net income fell $1.7 billion to $6.1 billion in 2021, as all western provinces saw decreases, while the remaining provinces all posted gains, led by Ontario. 

The value of inventory change had a negative impact on net farm income in the Prairies, as the drought and consequent poor harvest left year-end farm stocks for several crops at their lowest levels in years, StatsCan said. 

Source: DePutter Publishing Ltd.

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