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Realized Net Farm Income Up Even More Sharply in 2020

An already good year for Canadian farmers in 2020 was even slightly better than initially expected.

In a revised farm income report released Tuesday, Statistics Canada said national realized net income jumped 84.4% this past year to $9.4 billion. That is up slightly from the 84.2% gain the federal agency reported back in May. The hefty increase in 2020 realized net farm income followed a 5.1% advance in 2019 and a 32.7% decline in 2018. (Realized net income is the difference between a farmer's cash receipts and operating expenses, minus depreciation, plus income in kind.)

Excluding cannabis, 2020 realized net farm income was up 73.9% to $9.6 billion, compared to the 71.9% increase reported in May.

On the other side of the ledger, farm operating expenses (after rebates) increased by 1.9% in 2020 to $54.2 billion — the smallest increase since 2016 (+0.8%) but still higher than the 1.3% advance reported back in May. In 2019, farm operating expenses rose 5.8%.

However, StatsCan cautioned the revised data for 2020 do not account for challenges faced by Canadian producers in 2021 — drought, continued processing backlogs and rising costs. On the other hand, the strength in 2020 farm income was attributed to rising grain and oilseed prices amid strong domestic and international demand, despite the challenges posed by COVID-19.

Saskatchewan accounted for more than two-fifths of the 2020 national increase, while realized net income declined in Newfoundland and Labrador, Nova Scotia, New Brunswick, and British Columbia. These four provinces did not benefit as much from robust export demand for grains, oilseeds and specialty crops, nor from lower machinery fuel and fertilizer prices, as agriculture industries in these provinces are not heavily concentrated in crop production, StatsCan said.

Farm cash receipts, which include market receipts from crop and livestock sales as well as program payments, rose 8.5% to $72 billion in 2020 — the largest percentage gain since 2012 (+8.7%). Market receipts for crops were up 15% to $42.2 billion in 2020, while livestock receipts were down 0.7% to $26.4 billion. Program payments were up 10.8%.

Back in May, StatsCan had total farm cash receipts up a slightly more modest 8.3%, with crop receipts up 14.8% and livestock down a steeper 1.1%. Direct program payments were steady at 10.8% higher.

The 15% increase in crop receipts in 2020 was driven by higher canola, lentil and cannabis receipts, which more than offset lower fruit and vegetable sales. Excluding cannabis, crop receipts would have increased by 13% — the largest increase since 2012.

In particular, canola receipts were up 19%, the largest year-over-year increase since a 38.2% jump in 2011. Lentil receipts more than doubled in 2020, as both prices (+38.9%) and marketings (+49.6%) posted strong gains. Farm cash receipts for Canada's largest crop by tonnes produced — wheat, excluding durum — increased by 10.7%, as marketings rose 11.7%.

Cannabis receipts rose 52.5% in 2020. The introduction of edibles, cannabis-based drinks and topicals in late 2019 and early 2020, combined with more retail outlets in some provinces, contributed to an increased demand for legal dried cannabis, StatsCan said.

As for livestock, cattle receipts were down 3.9% in 2020 on lower prices (-2.9%) and marketings (-1.1%). Slaughter cattle receipts fell 4.1%, accounting for nearly four-fifths of the decrease in cattle receipts. The second quarter was particularly challenging for cattle producers, as cattle receipts fell 18.7% from the same quarter in 2019, as meat processing capacity was severely limited during the first wave of the pandemic.

In contrast, hog receipts rose 1.1% in 2020, as strong export demand for pork pushed hog marketings higher (+5.7%), despite pandemic-related disruptions in the North American processing sector. Receipts fell sharply in the second quarter (-15.4%) but rebounded thereafter.

Total net income rose $2.4 billion in 2020 to $7.8 billion, following a $547 million increase in 2019. Total net income rose in six provinces but declined in each of the Atlantic provinces. Increases in Ontario and Saskatchewan accounted for over two-thirds of the national rise. (Total net income is realized net income adjusted for changes in farmer-owned inventories of crops and livestock. It represents the return to owner's equity, unpaid farm labour, management and risk.)

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