Farm income reports released earlier this week by Statistics Canada offer a mixed bag of results for the national agricultural sector. While initial figures for the first three quarters of 2023 appear positive, underlying financial strains remain.
Highlighting the positive, Statistics Canada reported a notable 7.9% year-over-year increase in January-September farm cash receipts to $72.5 billion, as gains in crop and livestock returns – up 12.1% and 8.9% to $41.4 billion and $27.2 billion, respectively – offset a decline in government payments.
However, the other side of the ledger paints a less optimistic picture. While 2023's total farm operating costs will not be released until later, the situation in 2022 casts a long shadow.
In its report on 2022 farm income, StatsCan estimated last year’s total farm expenses - operating expenses and depreciation – at $83.4 billion, an annual increase of 18.6% as farmers paid more for fertilizer, feed, and fuel. It was that increase in operating expenses that was responsible for a 7.6% drop in 2022 realized net farm income - even as full year total farm cash receipts climbed 14.6% to $95.1 billion.
Realized net farm income is a crucial metric, reflecting the net result of cash receipts, operating expenses, depreciation, and in-kind income. This figure offers a clearer view of Canadian farms' financial health than farm cash receipts alone.
Significant cost hikes were noted in 2022, with fertilizer prices soaring by over 54%, feed costs up 20%, and machinery expenses, including fuel, jumping by 52.5%.
The good news is farm expenses are easing. The latest Statistics Canada Farm Input Price Index shows a significant drop in fertilizer prices by over 21% in the second quarter of 2023. Machinery costs fell by nearly one-third, and feed prices decreased by 8.4%. But despite the reductions, input costs remain relatively high. In the second quarter of 2022, fertilizer prices had skyrocketed by 80.8%, and machinery fuel prices had surged by 78.5%, so costs have not come all the way back down.
Meanwhile, uncertainty clouds the remainder of 2023. Geopolitical tensions could spike oil costs, and the ongoing interest rate hikes by the Bank of Canada add to the financial pressures. National farm debt climbed to $138.8 billion by the end of 2022, a 6.8% increase.
Furthermore, generally declining prices for major crops like canola and wheat threaten to weigh on farm incomes for the year.
While Canadian farmers experienced robust financial gains in 2020 and 2021, with realized net farm income soaring by over 100% and almost 70%, respectively, leaner times have now arrived.
