by SUSAN MANN
Last year was a very good year for Canadian agriculture with most sectors doing well and that will continue into this year, says a senior federal agriculture department official.
The official made the comments during a technical briefing held Wednesday by telephone in conjunction with the federal agriculture department’s release of its annual medium term outlook and farm income forecast publications.
At the start of the briefing, Patrick Girard, Agriculture and Agri-Food Canada spokesperson, said reporters were only permitted to paraphrase the information and attribute it to a senior agriculture department official. Broadcasting the briefing was prohibited.
The senior official says the farm income forecast represents an estimate of farm receipts, operating expenses and net incomes for both 2013 and 2014.
Net cash incomes in both 2013 and 2014 will reach $13 billion, declining only slightly from the record level reached in 2012, he says. In today’s dollars, 2013 and 2014 income levels are a continuation of the trend of historically high income levels in recent years and when adjusted for inflation are among the highest levels since the mid 1970s.
Net cash income, which is how much money farmers have available for debt repayment, investment in their farm businesses or for personal expenditures, is being driven by strong grain and oilseed seeds, record livestock prices and lower input costs, such as fertilizer, he says.
Other numbers Agriculture and Agri-Food reported include:
- Program payments declined by 25 per cent due to favourable conditions in 2013.
- Average farm level net operating income is forecasted to increase to $68,498.
- Average net worth per farm is projected to hit an all-time high of $2 million in 2014.
- Average total farm family income will hit $132,579 in 2014.
Ontario Federation of Agriculture president Mark Wales says Agriculture and Agri-Food Canada’s rosy picture of how farmers are doing is accurate “for the most part but it will be tempered because we haven’t gone through 2014 yet and we have porcine epidemic diarrhea in the hog industry.”
The impact of PED isn’t known yet “although pork prices are up. So for those who are not affected by the disease, prices are up and feed costs are down,” Wales says, noting lower feed costs helps the entire livestock sector.
In his comments on the medium term outlook report, the senior federal agriculture department official says significant increases in grains and oilseeds production last year in major crop-producing countries led to a decline in key U.S. prices for 2013. But higher crop prices will return as a result of growing demand and a return to more normal harvests.
Rising energy costs over the next 10 years will continue strengthening the links between global agriculture and non-food use markets, the official says, noting the west Texas intermediate crude oil prices could hit US$140 a barrel by 2023.
The Canada-United States dollar exchange rate will remain below par but the Canadian dollar will continue to be relatively strong compared to its long-term historical level.
Domestic feed grain demand will mainly be satisfied by domestic production. Feed grain prices have moderated recently but feed grain will continue being the most significant cost for the livestock sector.
For livestock farmers, feed grain prices won’t be as high as they were in 2012 and farmers will also benefit from higher cattle and hog prices over the medium term, the official says.
Very low U.S. cattle inventories and the slow pace of breeding herd rebuilding in America will continue to keep prices high in the future, while hogs prices will remain relatively high due to lower than anticipated inventories.
For supply-managed commodities, such as dairy, poultry and eggs, the federal agriculture department is projecting stable growth in its medium term outlook report.
The projections in the medium term outlook are obtained by using the current market and policy conditions, such as world population growth, rising incomes in emerging economies and increasing non-food uses of farm crops, for officials to estimate how the sector will evolve over the next 10 years. Macro-economic forecasts and other economic data are also used. The medium term outlook is based on several factors projected to shape global demand and supply for farming commodities over the next 10 years.
The farm income forecast outlines the outlook for the industry as a whole and each sector. It’s the federal agriculture department’s short-term measure of the financial strength of the agricultural sector. The two reports together provide a snap shot of the state of the farming sector, he says. BF
Comments
An article today, in the Financial Post, about investment rules outlined by Warren Buffet, shows the reality of farmland values from Canada to the US. Warren bought 400 acres in 1986 for $700 per acre, which he estimates todays value to be 5 times that, or $3500.00 Yet, here we have 100 acre farms selling for what 400 brings there. Raube Beuerman
Buffett bought in 1986, the last time the price/earnings multiple of land was under 15:1 - in Ontario, it is currently about 50:1 thanks, in large part, to government interference in ethanol and supply management.
More importantly, one needs to always be reminded of the adage - "things always look the rosiest just before the crash", and by ignoring today's stratospheric price/earnings multiples, today's farmers are living on borrowed time.
Stephen Thompson, Clinton ON
While I do agree that p/e ratio on land is too high, at 50:1 you either think your land is worth more than anyone else or you are a dam poor farmer.
Land which rents for $300 per acre, and lots is, and which sells for $15,000 per acre, and lots did, is a price-earnings multiple of 50 - 1.
Stephen Thompson, Clinton ON
Dont forget the Chinese hold a lot of foreign debt and are in the real estate market big time. How long will it be before they own Detroit, with access to the worlds largest fresh water reserve?
The price of farm land varies through out the United states just as it does through out this province. Farm land in Wisconsin goes for 4000 and acre while in Michigan farmland can go for 7000. Without qualifying where the land is you can not make a blanket statement comparing prices paid
The value of real estate should be driven primarily by interest rates, but when it comes to agricultural we unfortunately need to throw government policy into the mix. Comparing land that is intended for the same purpose (cashcrop with equal yields) is a fair comparison of showing how overpriced land is here.
Raube Beuerman
If any farmer in Canada is protected by SM, or is "free market" and accepting GF2 or any other subsidy monies (mandates, or other lobbied Gov. B.S.) you need to retract farmer and replace that with abuser of fellow citizens! If you can,t survive in this farming industry without the assistance of someone else's money, I would appreciate your exodus from a once revered occupation.
Is a person protected by a union or minimum wages abusing fellow consumers? By your logic, they are.
The current price of feeder cattle are also deemed to be stratospheric. I wonder what the price of a Big MAC was in 1986 compared to now is? House prices in Toronto have also gone stratospheric as well as the price of a new car or pickup. Let's not forget about min. wage either or propane.
Post new comment