Income forecasts prove urgent support needed for ag sector

April 27, 2010

OTTAWA -- Agriculture and Agri-Food Canada's farm income forecasts released last week show that Canadian farmers will face an extraordinarily difficult year, particularly those in the cattle and hog sectors. Farm leaders meeting today in Ottawa reviewed the government report and confirmed that the figures sound consistent with what they have been hearing from producers across Canada.

"The government's own forecasts show deep losses for many commodities and highlight that the business risk management programs currently in place were not designed to function with today's unique set of economic circumstances," said CFA President Laurent Pellerin at the Federation's board meeting. "While we appreciate the government's commitment to fostering a long-term industry strategy, it's very clear that farmers need additional support to get through the short-term. The CFA has been advocating for this support and has presented government with several practical proposals to address the situation."

According to government forecasts, cattle and hog producers may lose startlingly large amounts of revenue, as much as 95% in some cases. The report states:

• "Net operating income* for the average cattle farm is forecast to be $10,889 in 2009. But net operating income declines to -$5,195 in 2010..."
• "Net operating income for the average hog farm is forecast to be $45,558 in 2009, but will decline to $1,719 in 2010, below the 2004-2008 average of $72,842."

The report also highlights that more and more farm families depend on non-farm income in order to keep operating their farms; meanwhile farm debt levels will continue to rise. As noted in the report, "other family income, on average, is forecast to be $83,173 per farm family, an increase of 18% relative to 2004-2008." Input costs, for items such as fertilizer and pesticides, are also expected to increase over the next year.

Canadians are fortunate to enjoy this country's abundance of safe, affordable, and high quality food. The agri-food system is a key part Canada's economy. In 2008, it directly provided one in eight jobs and accounted for 8.1% of total GDP.  While other groups along the food value chain (such as processors, distributors, and retailers) have generally maintained stable or increased profits, the farmer's relative share of retail food prices continues on a downward trend.

"If Canadian farms are to stay competitive in a complex global market, governments must take action quickly and work closely in partnership with our industry on short-term measures to help farmers adapt to economic circumstances that are beyond their control," said Pellerin. "Ensuring the viability of the sector now is crucial as we move toward developing long-term strategies for the food system in Canada."

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*Net Operating Income measures cash flow (revenues minus expenses) of farm operations. This is the amount of money the farm operation has available for debt repayment, investment or withdrawal by the owner.