By Connor Lynch
Canada’s been riding a wave of strong farm income for the last few years, but what goes up, must come down, said Farm Credit Canada’s chief agricultural economist J.P. Gervais.
“Looking at the average, things look pretty strong for the next two years,” said Gervais in an interview with Farmers Forum.
Ontario’s farm income appears to be entering a decline trend after reaching record highs, but Gervais said that the changes so far are relatively minor fluctuations and that we’re still seeing record highs for farm incomes across the country.
Ontario is the third-most profitable province in terms of net cash income and hit its record year in 2014 when it peaked at $2.6 billion. That dropped slightly to $2.5 billion in 2015 and Ontario farmers are not expected to make that money back this year. Saskatchewan was Canada’s powerhouse last year, raking in $5.7 billion in net cash income. Alberta was second with net cash income at $3.2 billion.
In 2014, soybeans were the biggest money maker for crop farmers, taking in $900 million of the total $2.2 billion in total crop cash receipts and tripling cash receipts for corn.
Gervais explained that with incomes at their peak, the net cash income decline was not a drop in the bucket but was also not that significant. Going forward, stability is the goal, not an income increase, he said.
Grains and oilseeds have been very strong in recent years, whereas the livestock sector is having more trouble, he said. FCC is predicting a six per cent drop in cattle receipts for 2016. “That’s a significant decline, but we’re declining from the top of the cycle.”
Crop farmers are likely looking at another couple of strong years, said Gervais. “Demand for feed is strong with the livestock industry doing relatively well and expanding in the U.S., demand from China is very strong, demand for biofuels that we thought would come down is still very strong.”
But even grains and oilseeds are going to see a revenue decline. Long-term, production worldwide is on the rise, said Gervais, and that’s going to hurt incomes. Production issues in other parts of the wold, particularly in South America, have helped, but those are short-term bonuses, he said.
A downturn, however, is nothing new, he added. “Farming is a cyclical industry, more so than any other industry in Canada. Farmers shouldn’t panic, but they should have a risk management program in place.”
