Features Production Research
Canadian farm income improve in 2011

November 5, 2010,
Toronto, Ont – Dragged down in part by the squeeze from higher input prices,
farm incomes will likely decrease across Canada this year, according to the
latest report on agriculture from TD Economics.

November 5, 2010,
Toronto, Ont – Dragged down in part by the squeeze from higher input prices,
farm incomes will likely decrease across Canada this year, according to the
latest report on agriculture from TD Economics.

The 2011 outlook is
brighter as TD Economics expects a significant improvement in net farm incomes,
with farm cash receipts rebounding largely as a result of a rebound in yields
from the 2010 depressed level and to a lesser extent, higher prices. This year’s
report provides a review and outlook across regions and agricultural
sectors. 

“Production and income
performances have varied widely from coast to coast this year, driven by
factors such as differing industry mixes and growing conditions,” says Derek
Burleton, vice president and deputy chief economist, TD Bank Financial Group,
and author of the report. “While floods have hurt the wheat crop in the
Saskatchewan, favourable weather conditions have been supporting a good year
for soybeans and other crops in Ontario and Québec.

“On average, Canadian
farm income is likely to decline moderately. However, the diversity of the
Canadian agriculture sector will be reflected in differing income prospects
across the nation in 2010 and 2011.”

Highlights of the report
include:

• Incomes to decrease due
  to increased input costs: In 2010, net farm
  incomes will take a hit from increases in input costs.  Energy prices are
  estimated to be about 20 per cent higher this year than last.  Similarly,
  fertilizer prices – with the exception of potash – have also risen above last
  year’s levels as inventories were depleted. Other costs, including wages and
  transportation, have also risen off their recessionary lows. In addition, the
  livestock sector is facing higher feed costs and is still coping with
  uncertainty associated with U.S. country-of-origin labeling (COOL) regulations. While the squeeze from
  higher prices is expected to remain a challenge for Canadian farmers in 2011,
  pressures from higher input costs could lose a step compared to this year as
  the pace of growth globally stabilizes in a moderate range. Another piece of
  good news for farmers on the cost side is that interest rates are likely to
  remain low. In the face of a slowing economy, the Bank of Canada (BoC) rate is
  expected to raise its overnight rate from its current level of one per cent to
  only two per cent by the end of 2011, which is equivalent to zero in real
  (after-inflation) terms. Adding it all up, net
  Canadian farm incomes in 2010 will likely fall from 2009 levels. For 2011,
  significant improvement in net farm incomes appears likely as farm cash
  receipts rebound largely as a result of a rebound in yields from this year’s
  depressed level and to a lesser extent, higher prices.
• Weather creating different
  outcomes across Canada: The big story in
  Saskatchewan this year was excessive moisture conditions and below
  seasonal-average temperatures that are likely to hit both quantity and quality
  of wheat and barley, offset to some extent by increased cattle and calf
  receipts and government program payments. While Alberta, Manitoba and to a
  lesser extent British Columbia have also been hit by the excessive moisture
  conditions, the impact on farm cash receipts is likely to be less substantial
  due to their stronger orientation towards livestock and – in the case of B.C. –
  supply managed industries, where cash receipts are projected to have grown this
  year.  And in Manitoba, 2010 is projected to be a record year for soybean
  production. Elsewhere, Ontario and
  Québec will benefit from respectable turnouts in soybeans, corn, certain fruits
  and vegetables and livestock receipts, which together will keep farm cash
  receipts growing at a respectable five to seven per cent clip this year. In
  Atlantic Canada, healthy rainfalls during the summer will help boost 2010
  production levels for several commodities, including small fruits and
  vegetables. Potato cash receipts in Atlantic Canada are also expected to fall
  moderately this year – despite production gains in PEI. In 2011, look for
  provinces hit by this year’s flooding to enjoy a return to more normal levels
  of production, lifting cash receipts and farm incomes accordingly. Expected
  changes are included in a table accompanying the full report. Net incomes in
  the west are set to improve but remain below their recent peaks in 2008. On the
  plus side, net income in Québec is expected to reach a new high next year.

A closer look at
agricultural sectors from coast to coast is available in the full TD Economics
report at: http://www.td.com/economics/index.jsp.