| | Alberta farm income, 2006 | Tables and figures
Measures of Net Farm Income (1)
The agriculture economic statistics program uses three aggregate measures of net farm income:
Net cash income measures farm business cash flow (gross revenue minus operating expenses) generated from the production of agricultural goods. Net cash income represents the amount of money available for debt repayment, investment or withdrawal by the owner.
Realized net income (RNI) measures the financial flows, both monetary (cash income) and non-monetary (depreciation and income-in-kind), of farm businesses. Similar to net cash income, realized net income represents the net farm income from transactions in a given year, regardless of the year the agricultural goods were produced.
Total net income measures the financial flows and stock changes of farm businesses. Total net income values agriculture economic production during the year that the agricultural goods were produced. It represents the return to owner's equity, unpaid labour, management and risk.
Components of Net Farm Income Measures
Farm cash receipts include revenues from the sale of agricultural commodities, program payments from government agencies, and payments from private crop and livestock insurance programs. Receipts are recorded in the calendar year (January-December) when the money is paid (cash basis) to farmers. Farm to farm sales are excluded. They are assumed to cancel each other out, and have no net impact.
Farm operating expenses represent business costs incurred by farm businesses for goods and services used in the production of agricultural commodities. Expenses, which are recorded when the money is disbursed by the farmer, include property taxes, custom work, livestock purchases, rent, fertilizer and lime, pesticides, machinery and building repairs, fuel for heating and machines, wages, interest and business share of insurance premiums.
Income-in-kind measures the value of the agricultural goods produced on farms and consumed by farm operator families. It is included to measure total farm production. There is no monetary disbursement related to income-in-kind. It is calculated using Statistics Canada estimates of per capita food consumption, coupled with Census (2) measurements of the farm population and the average prices that producers would have received in the marketplace.
Depreciation charges account for the economic depreciation or for the loss in fair market value of the capital assets of the farm business. There is no monetary disbursement associated with depreciation. Calculated on farm buildings, farm machinery, and the farm business share of autos, trucks and the farm home, depreciation is generally considered to be the result of aging, wear and tear, and obsolescence. It represents a decrease in the potential economic benefits that can be generated by the capital asset.
Value of inventory change (VIC) measures the dollar value of the physical change in producer-owned inventories. This concept is used to value total agricultural economic production. To calculate VIC, the change in producer-owned inventories (between the end and the beginning of a calendar year) is first derived and then multiplied by the average annual crop prices or value per animal. This calculation is different from the financial or accounting book value approach, which values the beginning and ending stocks, and then derives the change.
(1) Source: Adapted from Agriculture and Agri-Food Canada and Statistics Canada, Understanding Measurements of Farm Income, Publication No. 2060/B and Catalogue No. 21-525-XIE, November 2000, Section 1 "Agriculture Economic Statistics Program Measures".
(2) Statistics Canada, Census of Population
Alberta Farm Income, 2006
Farm Cash Receipts
In 2006, Alberta’s total farm cash receipts (FCR) was practically unchanged at $7.8 billion and the fifth highest on record. Down marginally by 0.7 per cent from 2005, the decline stemmed from lower livestock market receipts and direct program payments to producers more than offsetting an appreciable increase in crop market receipts. Unlike FCR, farm market receipts for the province (crop and livestock receipts excluding program payments) increased for the third consecutive year, rising 1.7 per cent to $6.9 billion, from $6.7 billion in 2005. As well, these receipts were the fourth highest on record, and 1.5 per cent above the average for the previous five years (2001-2005).
Following a decline in 2005, crop market receipts rebounded in 2006, increasing 7.6 per cent to $2.6 billion, from $2.4 billion in 2005. In general, the growth in receipts was due to increased marketings, along with stronger prices for some principal crops. Canola receipts jumped 33.8 per cent to a record $991.0 million, displacing the previous record of $881.4 million in 1998. The sharp increase stemmed from higher marketings (up 30.0 per cent) and prices (up 2.9 per cent). With respect to wheat, higher marketings pushed receipts up by 1.9 per cent to $810.6 million ($795.7 million in 2005). Barley receipts fell 6.7 per cent to $133.0 million ($142.5 million in 2005), as both prices and marketings declined. Also, oats receipts were down 16.1 per cent to $33.4 million ($39.8 million in 2005), the result of substantially lower marketings.
Livestock market receipts were slightly lower in 2006, falling 1.5 per cent to $4.3 billion, from $4.4 billion in 2005, marking the first decline since 2003. The slippage was due mainly to lower receipts for hogs, dairy, poultry, and eggs. Most livestock receipts were down from year earlier levels due to lower marketings and/or prices. More specifically, hog receipts declined 8.9 per cent to $495.3 million ($543.8 million in 2005), while dairy receipts fell 4.2 per cent to $382.1 million ($398.7 million in 2005). For poultry and eggs, receipts were down 2.0 per cent to $207.2 million ($211.5 million in 2005). On a positive note, cattle and calf receipts increased in 2006, rising 0.5 per cent or $15.7 million to $3.0 billion as a result of marginally higher marketings and prices. As well, sheep and lamb receipts increased 8.9 per cent to $19.6 million ($18.0 million in 2005), due to stronger prices.
Direct Program Payments
Direct program payments to Alberta producers declined 15.4 per cent in 2006 to $945.1 million, from $1.1 billion in 2005. This was mainly the result of the winding down of some major programs, including bovine spongiform encephalopathy (BSE) and Net Income Stabilization Account (NISA), now replaced by the Canadian Agricultural Income Stabilization (CAIS) program. NISA withdrawals declined 33.4 per cent to $62.7 million, from $94.1 million in 2005, while BSE payments were almost totally phased out. Moderating the decline in total program payments were higher payments for crop and hail insurance, up 49.6 per cent to $221.6 million ($148.1 million in 2005), and CAIS payments (including the CAIS Inventory Transition Initiative), which rose 5.8 per cent to $475.6 million, from $449.6 million in 2005.
Farm Operating Expenses and Net Farm Income
In 2006, Alberta producers spent an estimated $6.7 billion in farm operating expenses (net of rebates), up 3.6 per cent from $6.5 billion in 2005. Expenses were impacted during the year by many factors, such as inflation, rising interest rates and energy costs, and the rapid appreciation of the Canadian dollar against the U.S dollar. Costs for several major expense items increased, including commercial feed (up 6.7 per cent to $1.1 billion), machinery fuel and repairs (up 4.1 per cent to $1.0 billion), interest (up 16.7 per cent to $555.8 million), cash wages, room and board (up 4.0 per cent to $568.9 million), and fertilizer and lime (up 2.4 per cent to $634.1 million). Moderating the overall increase was a decline in livestock and poultry purchases (a major expense item), which fell 5.9 per cent to $742.3 million.
With lower FCR and higher operating expenses, net cash income (FCR less operating expenses) fell 21.0 per cent in 2006 to $1.1 billion, from $1.4 billion in 2005. Realized net income (RNI), the sum of net cash income and income-in-kind ($36.6 million) less depreciation (a non-cash cost of $1.2 billion), was negative $16.1 million, down from $271.5 million in 2005. When RNI was adjusted for value of inventory change (both crops and livestock), the resulting total net income was negative $360.6 million (compared with $561.6 million in 2005). Just to note, livestock and crop inventories (notably canola) fell in 2006, due to increased marketings coupled with lower production.
Farm Debt and Capital Values
Total farm debt outstanding as at December 31, 2006 was a record $11.0 billion, up 5.5.per cent from $10.4 billion in 2005. In all, chartered banks were owed $4.4 billion by Alberta producers (40.4 per cent of the total farm debt), down 1.0 per cent from $4.5 billion in 2005. The next largest group of lenders after chartered banks was provincial government agencies such as the Agricultural Financial Services Corporation. This group accounted for $2.5 billion (22.7 per cent) of total debt owed by producers in 2006, up from $2.3 billion (21.6 per cent) in 2005. Federal government agencies such as the Farm Credit Corporation followed with a total of $2.2 billion in loans to Alberta producers in 2006 (19.7 per cent of total debt), up from $1.9 billion in 2005 (18.2 per cent of total debt). Credit Unions were also an important credit source, accounting for $713.5 million worth of loans in 2006, up 5.9 per cent from $673.5 million in 2005.
In 2006, the total value of Alberta farm capital (machinery and equipment, land and buildings, and livestock and poultry) was a record $60.5 billion. This was up 4.1 per cent from $58.1 billion in 2005 and marked the third successive record high. The value of land and buildings increased 3.6 per cent to $46.0 billion ($44.4 billion in 2005), while machinery and equipment was up slightly by 0.9 per cent to $9.1 billion ($9.0 billion in 2005). With regard to the value of livestock and poultry, Statistics Canada has noted that “valuing the on-farm inventories of livestock has proven challenging since May 2003 when trade restrictions imposed as a result of bovine spongiform encephalopathy created uncertainty in all livestock markets”. Despite this challenge, the value of Alberta livestock and poultry was estimated at $5.5 billion in 2006, up 14.6 per cent from $4.8 billion in 2005.n
ollowwital debt), up from $1.9 billion in 2005 8.2 pr cent of total debt). Credit Unions were also an important c
Tables and Figures
Tables | PDF File
Size |
| Table 1 - Selected Farm Income Statistics ($'000), Canada and Provinces, 2002-2006 | |
| Table 2 - Farm Cash Receipts by Type, Alberta and Canada, 2005 and 2006 | |
| Table 3 - Alberta Farm Cash Receipts by Type, 1977-2006 | |
| Table 4 - Alberta Farm Cash Receipts From the Sale of Crops, 1977-2006 | |
| Table 5 - Alberta Farm Cash Receipts From the Sale of Livestock, 1977-2006 | |
| Table 6 - Alberta Farm Operating Expenses and Depreciation, 1977-2006 | |
| Table 7 - Alberta Net Income From Farming Operations, 1977-2006 | |
| Table 8 - Current Value of Alberta Farm Capital and Value Per Acre of Farm Land and Buildings, 1977-2008 | |
| Table 9 - Alberta Farm Debt Outstanding by Lender at December 31, 1977-2006 | |
Figures | PDF File
Size |
| Figure 1 - Distribution of 2006 Canadian Farm Cash Receipts (Including Program Payments) ($ Billions) | |
| Figure 2 - Alberta Farm Income Indicators ($ Millions), 2002-2006 | |
Figure 3 - Alberta Farm Cash Receipts, Crop Market Receipts and Livestock Market Receipts, 2002-2006
Figure 4 - Distribution of Canada Farm Cash Receipts ($ Billions), 2006
Figure 5 - Per Cent Change in Farm Market Receipts (Crops and Livestock), Canada and Selected Provinces, 2006/2005. | |
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