Farm Reciepts up...Now is the time to buy!

Farm Cash Receipts Up 14 Percent

According to Statistics Canada, Market receipts for Canadian farmers from the sale of crops and livestock totalled $41.8 billion in 2008, up 14.2% from a year earlier. Including program payments, total cash receipts for 2008 amounted to $45.9 billion.

Receipts for crop producers increased 25.6% to $23.0 billion, mainly on higher prices, while livestock receipts rose 2.9% to $18.8 billion in 2008.

Revenue from the two main cash crops increased in 2008. Receipts from wheat including durum were up 36.8%, while receipts from canola were up 42.1%. Stronger prices for grains and oilseeds, particularly for the first three quarters of 2008, were mostly responsible for the increase. Prices in the fourth quarter began to drop with declines ranging from 4.0% for barley to 31.3% for wheat, when compared with the average price for the first three quarters of 2008.

Increases in crop prices resulted from a tight world supply and strong demand. Although grain and oilseed prices climbed, so did the cost of their inputs. Fertilizer prices and diesel fuel prices rose 60% and 37% respectively during the first 11 months of 2008 compared with the same period in 2007, according to the Industrial Product Price Index.

In the livestock sector, revenue from cattle and calves increased 2.7% in 2008, with lower prices and record marketings. A 5.5% increase in the value of cattle and calf exports more than offset a 0.9% drop in cattle and calf prices.

Farm cash receipts for hogs declined 3.3% as the average price was 2.0% below 2007 and marketings fell 1.3%. While receipts from domestic hog slaughter increased 2.9% in 2008, receipts from live hog exports dropped 27.5%.

Higher grain prices resulted in higher feed costs for the livestock sector. Profits were also adversely affected in 2008 by a strong Canadian dollar and uncertainty over the Country of Origin Labeling law in the United States. As the year advanced, the Canadian dollar weakened and cost-price relationships improved with the decline in grain prices.

The supply managed sector showed a 5.7% increase in farm cash receipts as both prices and marketings rose for milk, poultry and eggs. Supply-managed commodities accounted for 44% of total livestock receipts.

Program payments amounted to $4.1 billion in 2008, up 0.8% from 2007.

Receipts rose in all 10 provinces in 2008. The largest increases occurred in Saskatchewan (+23.3%) and Alberta (+15.2%).

Note: Farm cash receipts measures gross revenue for farm businesses. They do not represent their bottom line, as farmers have to pay their expenses and loans and cover depreciation. Preliminary information on net farm income for 2008 will be available in May 2009. Net farm income for 2007 was released on November 24, 2008.

Dieter Turek

Dieter Turek

Managing Broker
CENTURY 21 Dreams Inc., Brokerage*
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