Farm income hits record high despite extreme weather, report shows

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The Canadian farming sector is estimated to have achieved record-breaking incomes in 2023 despite droughts, extreme weather and global conflict, but that trend could reverse this year, according to a federal agriculture department report.

The industry’s net cash income is expected to have surged by 13 per cent to a new record of $24.8-billion, says an Agriculture and Agri-Food Canada (AAFC) report released Friday, ahead of the official Statistics Canada estimates in May.

Net cash income is the difference between cash receipts and operating expenses, and is the primary metric used by Ottawa to gauge farm income.

Although operating expenses jumped by more than 20 per cent in 2022, that increase has flattened, with operating expenses up just 2 per cent in 2023, the report says.

Some key inputs, such as fertilizer and fuel expenses, likely declined, the report says. But other expenses, such as labour and interest rates, remained high.

Meanwhile, geopolitical instability because of the continuing Russia-Ukraine and Israel-Hamas wars, as well as the impact of drought in Western Canada and extreme weather in various parts of the country, have contributed to challenges.

Some of these pressures will also be felt by consumers this year. Food prices are expected to increase by between 2.5 per cent and 4.5 per cent in 2024, according to Canada’s Food Price Report, released last December. That means a family of four could expect to pay around $16,300 – $700 more than the previous year.

The record net cash income growth was driven by a 10-per-cent boost in livestock income, to $37.3-billion, with cattle prices being driven higher after droughts in the past few years. This offset an expected decline in income from hog sales, as the domestic market for pork is stagnant, and margins for pork farms are narrow.

Ottawa estimates average farm family income rose 11 per cent in 2023 to $239,000.

“We are pleased to see strong farm incomes coming out of a few years of unique challenges and high input costs,” Keith Currie, president of the Canadian Federation of Agriculture, said in an e-mailed statement.

But he noted that these figures do not speak to the reality of many farms, which continue to face risks from climate change and high interest rates ahead of what will likely be “the most expensive crop ever planted.”

However, the AAFC’s forecast for 2024 suggests the industry may see a reversal this year, with prices for major grains expected to continue falling and cattle prices anticipated to grow much more slowly.

In fact, that slowdown in meat prices has already begun. The global meat price index declined for the seventh consecutive month in January, after abundant supply and international export competition, according to the United Nations food agency.

Nonetheless, Ottawa’s expected figures for 2024 would still be nearly 30 per cent above the average over the past five years, making it the fourth best year on record, and comparable to levels seen in 2021 and 2022.

Inflation is also expected to fall in 2024, lifting some of the pressure off Canada’s agriculture industry. However, experts say labour problems will only worsen over the next decade.

The Canadian Agricultural Human Resource Council estimates that the country’s agricultural worker shortage will continue to grow, reaching a domestic labour gap of more than 100,000 jobs by 2030, according to a separate report released in early February. Temporary foreign workers could fill about three-quarters of that amount, but 22,000 jobs could still be left vacant.

Last September, Immigration, Refugees and Citizenship Canada announced it was starting to accept applicants for a new streamlined path to permanent residency for those with experience in the agri-food sector, including agricultural service contractors, farm supervisors, and retail and wholesale butchers.

In a recent statement, Agriculture Minister Lawrence MacAulay said Canada’s international trade in agricultural exports has nearly doubled since 2015, from $56-billion to $100-billion annually.