Canadian Farmers Doing Well Overall

A bright spot in economic news:  farmers are thriving!  Farming is no easy way to make a living, subject as it is to the whims of weather, disease, currency fluctuations, and more. So it’s good to hear from a Statistics Canada report published on May 25, 2016, that Canadian farmers are doing better than one might think.

From 2014 to 2015 net farm income rose 9.2% to $8.1 billion, and that’s on top of a 19.1% increase in the prior year. In fact, net farm income has risen in five out of the last six years (realized net farm income is the difference between cash receipts and operating expenses, minus depreciation, plus income in kind).

Operating expenses were up slightly in every province (1.2% to $44.4 billion in 2015), the smallest increase since 2010; however, an increase of 2.7% in cash receipts (to $59.4 billion in 2015) outpaced the increase in farm expenses, resulting in the gain in realized net income for the year.

What’s driving the gains in farm cash receipts?

• Overall, revenues from crops were up 5.2% (to $31.6 billion) while receipts from livestock declined slightly (0.2%, to $25.7 billion), the first decrease since 2009.
• Lentils, grown primarily in Saskatchewan, accounted for most of the growth in crop receipts, more than doubling thanks to record production levels, a 57.6% price increase, and increased exports, primarily to India.
• Canola was also a strong driver of increased cash receipts. A price increase of 3.5%, growth in marketing and exports, and increased crushing capacity that boosted domestic use all contributed to an increase of 8.5% (to $8.0 billion) for this crop.
• Wheat rose 5.1% from prior year, chiefly driven by price increases, and although the price of soybeans fell 7.9% receipts rose by 4.3% due to increased marketing.
• On the livestock front, a 7.0% increase in cattle and calf receipts was more than offset by a 17.0% decline in hog receipts. Whereas tight supplies in the cattle and calf market bumped prices by 20.4%, the reverse was true for hogs and increased inventories throughout North America drove prices down, accounting for the overall decline in livestock receipts.
• There was little movement in the supply-managed sectors of dairy, poultry, and eggs, with higher egg receipts accounting for most of the modest 0.3% gain.

Realized net income can vary widely from farm to farm and from region to region because of a number of factors, including the farm’s type of commodities and the prices for them, economies of scale and, of course, the weather.

While the news is good for national realized net farm income overall, in fact farmers in only four provinces enjoyed an increase: Newfoundland and Labrador, Saskatchewan, Alberta, and British Columbia.

Farmers play an essential role in our economy and in society in general and it can be a challenging way of life. Remember the next time you meet a farmer to thank them for the work they do.

The Knowledge Bureau T1 Professional Tax Preparation – Proprietorships course covers farming returns. For more information call 1-866-953-4769 or visit www.knowledgebureau.com.

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