Low prices led to 2009 cash income decline

Tuesday, January 18, 2011

by SUSAN MANN

It’s not surprising that Statistics Canada numbers show a decline in farm cash income for 2009, says a spokesman from a southwestern Ontario university business school.

Statistics Canada released a report today showing cash income from Canadian farm businesses was $10.7 billion in 2009, down one per cent from 2008. The decline came after increases of 20.1 per cent in 2008 and 16.5 per cent in 2007. Cash income fell in four provinces – Ontario, Quebec, Nova Scotia and Alberta. In all four provinces, declines in cash sources exceeded declines in cash uses.

David Sparling, chair of Agri-Food Innovation and Regulation at the University of Western Ontario’s Ivey Business School, says the decline in farm cash income for 2009 isn’t surprising because “we had grain prices running up in 2007 and 2008, which is a huge part of the reason why we had that significant increase in those first couple years.”

But in late 2008 and in 2009 grain prices declined. There were also record low hog prices and low cattle prices, he says, noting the Canadian dollar reaching parity with the American dollar means it’s not as attractive for U.S. processors and feedlots to source animals in Canada.

The global economic recession also knocked back demand and prices, Sparling says. “It’s pretty natural you’d see a decline in overall farm incomes and in overall revenues and to some extent in expenses.”

But Sparling says the 2010 numbers will be a whole lot better. Many farmers Sparling talked to have said it was one of their best years. Grain prices have recovered and meat prices are recovering somewhat.

“Producers really aren’t doing well but at least they aren’t bleeding as badly as they were a year ago,” he says.

For 2009, Statistics Canada reports that farmers’ cash sources fell 2.6 per cent to $46.8 billion while cash uses declined 3.1 per cent to $36.2 billion. Declines in fuel and interest expenses weren’t enough to offset a drop in program payments and livestock receipts.

The five main components of cash sources are: sales of primary production, sales of secondary production, program payment, government rebates and other income, it says in the Statistics Canada’s report. Cash uses are: inputs, business taxes, interest, cash wages to hire labour and cash rent to non-operators.

In the same report, Statistics Canada notes farmers’ current and long-term liabilities went up in 2009. Total outstanding loans were $45.8 billion in that year, a net increase of $2 billion from 2008.

The ratio of loans outstanding to cash income, which reflects the burden of farm debt on farm cash income, increased to 4.3 in 2009 from 4.1 in 2008, it says in Statistics Canada’s report. This means for every $100 in income in 2009 producers had a debt load of $430 compared to $410 in 2008. BF