Record Gross Farm Incomes in 2007

OTTAWA - Feb 25/08 - SNS -- Like it or not, cash receipts from the sale of agricultural commodities climbed to a record $36.3 billion in 2007, boosted primarily by a surge in grain and oilseed prices, reports Statistics Canada.

Receipts from crop sales hit a record $18.1 billion, up 25.0% over 2006 and 29.1% higher than the previous five-year average. Although grain and oilseed prices were the driving force for the increase, deliveries were strong as a result of producers drawing on their stocks to benefit from the high prices.

Livestock receipts grew 1.7% to $18.1 billion, the result of higher dairy and poultry prices and increased marketings. Cattle and hog revenues declined in the wake of lower prices, while exports of live animals to the United States climbed as the economics of feeding these animals supported this movement. Livestock revenues were 3.5% above the previous five-year average.

Program payments amounted to $4.1 billion, a 9.7% decline from 2006 and 9.5% below the previous five-year average. This was due in part to improved prices in the grains and oilseeds sector.

Total farm cash receipts, which include crop and livestock revenues plus program payments, reached a record $40.4 billion in 2007. This level was 9.5% above 2006 and 11.8% higher than the five-year average. It was the first time that receipts surpassed the $40-billion mark.

Farm cash receipts increased in all provinces except Prince Edward Island and New Brunswick, where they declined, and in Nova Scotia and British Columbia, where they remained stable. Gains ranged from 3.9% in Ontario to 18.0% in Manitoba.

Farm cash receipts are the first economic indicator available from Statistics Canada for the agriculture sector. They measure gross revenue for farm businesses only. They do not represent farmers' bottom line, as farmers have to pay their expenses, loans, and cover depreciation. Statistics Canada is scheduled to publish preliminary estimates of net farm income for 2007 on May 26, 2008.

While prices for grain and oilseed producers rose substantially in 2007 from low levels, inputs also increased. For example, the Industrial Product Price Index indicated that Canadian fertilizer prices rose 20.8% in 2007. In addition, livestock producers faced much higher feed costs. For instance, feed barley prices were 63.0% higher than in 2006.

Both farm cash receipts and operating expenses can vary widely from farm to farm because of several factors, including commodities, prices, weather and economies of scale.

In addition, a rapidly appreciating Canadian dollar against the US dollar has the impact of lowering returns to Canadian producers who depend heavily on international sales. The value of the Canadian dollar increased by more than 17% against its American counterpart during 2007.

Grain and oilseed prices have been increasing since the fall of 2006, boosted by expansion in the bio-fuel sector. Since that time, weather-related production issues in many of the world's major producing countries have tightened supplies, pushing prices to levels not seen in recent years.

Revenues from wheat (excluding durum) rose 43.4% to a record $3.2 billion in 2007. Durum receipts climbed to $962 million, up 68.2% from 2006. In both cases, the increase was the result of higher prices and Canadian Wheat Board payments, as marketings were down.

Barley receipts climbed to $793 million in 2007, the highest level since 1997 and an increase of almost 80% over 2006. This rise was supported by record prices and strong deliveries, especially in the fourth quarter, as producers harvested an above-average crop in 2007.

Canola revenues, which accounted for almost one-fifth of the overall crop receipts, hit a record $3.4 billion, up 37.0% from 2006.

Soybean revenues reached a record high of $1.0 billion, a 49.3% gain from 2006. This surge was the result of a 25.7% rise in prices and 18.7% higher deliveries.

The increasing use of corn in ethanol production drove prices 29.7% over 2006 levels, while a record crop in 2007 helped boost revenues to a record $1.0 billion.

Supply-managed commodities (dairy, poultry and eggs), which made up 43% of total livestock revenues, were the main force behind the 1.7% increase in livestock receipts in 2007.

Supply-managed revenues reached $7.9 billion, up 8.6% over 2006, the largest increase in the last 10 years.

Receipts for cattle and hog producers were adversely affected by the combination of reduced prices resulting from the appreciation of the Canadian dollar and higher feed costs. With more animals shipped south of the border for cheaper feeding, domestic slaughter decreased.

Cattle and calf revenues decreased 2.8% to $6.2 billion in 2007, as both prices and marketings declined. Despite higher receipts from the export of live animals, lower domestic slaughter and interprovincial trade pulled down overall cattle and calf receipts.

Receipts from cattle and calf slaughter, which accounted for almost two-thirds of the total, fell 6.0%, largely the result of reduced marketings. Revenues from interprovincial trade declined 20.9% as both marketings and prices fell. The dramatic rise in feed costs put downward pressure on feeder cattle prices.

Exports of live cattle and calf to the United States have been rising rapidly since the border was reopened in July 2005. Exports jumped over 35% in 2007 to 1.4 million head. Even so, exports remained well below the pre-BSE level of 1.7 million head in 2002.

Hog receipts fell 2.5% in 2007 to $3.3 billion, the result of lower prices. Marketings were up 1.0%. Prices were pressured mainly by a rising Canadian dollar, higher feed costs and ample supplies. Slaughter hog receipts, which accounted for about 80% of total hog revenues, fell 5.4% to $2.6 billion as both prices and marketings declined.

Farmers continued to export hogs to the United States at a record pace. Exports amounted to 9.9 million animals during 2007, surpassing the previous record set in 2006.

The decrease in program payments can be primarily attributed to the phasing-out of the Grains and Oilseeds Payment Program. As a new program in 2006, it delivered $747 million over the course of the year. However, in 2007, it delivered only $7 million as it wound down.

Payments under the Canadian Agricultural Income Stabilization program (CAIS) and CAIS-related programs declined 10.1% to $1.7 billion in 2007.

Cushioning the decrease, payments made under the Cost of Production Payment totalled $319 million. Provincial stabilization and crop insurance payments, to which producers contribute through premiums, both increased. Stabilization payments rose largely because of higher payout made to hog producers in Quebec.

                      Canada 2007 Farm Cash Recipts
                            (000,000 dollars)
                        2004       2005       2006       2007     Annual
                     Jan-Dec    Jan-Dec    Jan-Dec    Jan-Dec     Change
Canada                36,521     36,758     36,884     40,379       9.5%
All Wheat              3,018      2,478      2,825      4,193      48.4%
 Excl Durum            2,431      1,918      2,253      3,231      43.4%
 Durum                   587        560        572        962      68.2%
Barley                   565        449        441        793      79.8%
 Deferments             -691       -409       -517       -776      50.1%
 Liquidations of deferments  678    654        411        539      31.1%
Canola                 2,138      1,855      2,502      3,427      37.0%
Soybeans                 621        753        681      1,017      49.3%
Corn                     797        625        754      1,048      39.0%
Other cereals and oilseeds  459     439        506        714      41.1%
Special crops            971        825        860      1,227      42.7%
Potatoes                            780        895        839      -6.3%
Nursery crops                     1,887      1,950      2,048       5.0%
Other crops            5,933      3,099      3,212      3,077      -4.2%
 Total crops          14,489     13,434     14,523     18,147      25.0%
Cattle and calves      5,069      6,350      6,398      6,220      -2.8%
Hogs                   4,261      3,938      3,427      3,342      -2.5%
Dairy products         4,599      4,842      4,833      5,197       7.5%
Poultry and eggs       2,455      2,474      2,416      2,673      10.6%
Other livestock          768        777        760        712      -6.3%
 Total livestock      17,152     18,380     17,834     18,143       1.7%
Net Income Stabilisation Account  934 442      317        272     -14.2%
Crop Insurance           885        936        739        762       3.1%
Income Disaster Assistance Programs  1,014 1,797 2,760  2,149     -22.1%
Provincial Stabilization  626       391        497        838      68.6%
Other programs         1,421      1,377        214         69     -67.8%
 Total payments        4,881      4,943      4,527      4,090      -9.7%
Source: Statistics Canada


                    Canada Fourth Quarter Farm Cash Recipts
                             (000,000 dollars)
                        2007       2007       2007       2007  Quarterly
Quaterly Comparison  Jan-Mar    Apr-Jun    Jul-Sep    Oct-Dec     Change
Canada                  9889       9976       9764      10892       9.9%
All Wheat                757       1147       1068       1282      42.6%
 Excl Durum              633        896        912        852      16.7%
 Durum                   123        251        155        431     155.0%
Barley                   154        125        159        351     142.1%
 Deferments              -70       -100       -162       -452      39.9%
 Liquidations of deferments  473      5          8         39      50.0%
Canola                   697        812        940        982      32.9%
Soybeans                 248        170        178        407      34.3%
Corn                     271        207        150        390      24.2%
Other cereals and oilseeds  125     122        213        233      35.5%
Special crops            229        183        357        460      28.9%
Potatoes                 204        208        197        241       4.8%
Nursery crops            350        802        359        492       5.1%
Other crops              412        838       1044        837      -8.5%
 Total crops            3849       4519       4509       5263      24.0%
Cattle and calves       1664       1541       1543       1613      -9.3%
Hogs                     909        892        840        677     -19.7%
Dairy products          1242       1296       1312       1346       9.6%
Poultry and eggs         617        672        687        696      17.0%
Other livestock          257        142        171        162     -12.4%
 Total livestock        4688       4543       4553       4494      -2.9%
Net Income Stabilisation Account  258 8          3          3     -62.5%
Crop Insurance           117         22        185        432      54.3%
Income Disaster Assistance Programs  724 616   385        444     -31.3%
Provincial Stabilization  225       257        126        230     576.5%
Other programs            28         11          4         26     -62.9%
 Total payments         1352        914        702       1136       9.4%
Source: Statistics Canada