Question Period Note: FARM INCOME SITUATION FOR 2022 AND 2023

Q1 – Many farmers have seen large increases in expenses in recent years. How has this impacted their bottom line? Q2 – Which expenses have seen the largest increases in recent years? Q3 – How are the recent weather and climate challenges impacting farmers’ economic stability in 2023?
Q4 – What is the Government doing to support farmers during this challenging period?

R1 - Generally, overall income has remained strong, with only a small decline in net cash income in 2022, as increasing commodity prices and revenues helped offset the higher input costs. However, the impacts have been highly variable across different farm types and regions, and many producers have been impacted in different ways. Increases are expected for grain, potato, and dairy operations, while other farm types are expected to see a decline. R2 - Fuel, fertilizer, and feed expenses saw sharp increases in 2021 and 2022, as the economy recovered from the pandemic and, later on, Russia’s war against Ukraine significantly disrupted global commodity markets. These expenses are expected to moderate in 2023.

Interest expenses also increased in 2022 as the Bank of Canada raised rates to fight inflation. Interest expenses are expected to increase further in 2023. R3 - Impacts of the recent weather and climate challenges have been varied across the country, and the full extent of their impact is not yet known. Initial data indicates that the production of principal field crops is expected to be down 13 percent from 2022, as large portions of Western Canada have suffered continued precipitation deficits throughout the growing season. The Government is closely following how this and other factors are impacting the economic viability of the agriculture sector. R4 - Federal and provincial governments continue to provide support through the business risk management programs to help producers manage risks.

Net cash income (NCI) is the primary measure used by AAFC to assess the short-term outlook for farm income for the sector, and is the difference between all cash receipts and operating expenses. It represents the amount of cash generated by the farm sector that is available for debt repayment, investment or withdrawal by operators. As of May 25th, 2023, Statistics Canada reported that NCI was $22.5 billion (B), down 2 percent from the record of $22.9 B in 2021. While there was a significant increase in expenses of 21 percent to $72.5 B, farm cash receipts increased 15 percent to $95.0 B, offsetting most of the increase.
Data from Statistics Canada for the first six months of 2023 indicate farm cash receipts increased 10 percent to $48.3 B, compared to the same period in 2022. The largest driver was an increase in crop receipts of 20 percent, as higher wheat and canola marketings pushed up crop receipts, while livestock receipts increased 8 percent on the back of higher cattle receipts, and program payments declined 37 percent as crop insurance payments declined from record levels in 2022.
Statistics Canada has not released any estimates of expenses for 2023, but AAFC expects overall expenses to be largely stable. After seeing large increases in 2021 and 2022, commercial feed expenses are expected to be stable in 2023 while declines are expected for fuel and fertilizer. Interest expenses, which began rising in 2022, are expected to continue rising in 2023 in response to higher interest rates.
The final farm income situation for 2023 is still very uncertain. One of the key uncertainties is the current size and status of the crop. Based on data from Statistics Canada released on September 14, production of principal field crops is estimated at 84.5 million tonnes (MT) in 2023, down 13 percent from 2022 and 8 percent below the previous 2018-2022 average of 91.9 MT, although it is 16 percent above the 2021 production value of 72.9 MT. More data on the size of the crop is expected in the fall and will be critical to understand the final farm income picture for Canada in 2023.
More broadly, weather and climate conditions have impacted many regions of the country, such as wildfires and flooding in different provinces, but the extent of their impact on agricultural operations is still being determined. The department is continuing to monitor the situation and work with partners and will have a better sense of the farm income situation in late 2023/early 2024 when it completes its winter farm income forecast.

• A financially healthy agriculture sector is important for Canada’s economic well-being.
• Despite a large increase in expenses in 2022, net cash income remained historically high at $22.5 billion, only 2 percent below the record of 2021, as receipts also increased.
• The latest data indicates that farm cash receipts for the first six months of 2023 are up almost 10 percent.
• While overall expenses saw significant increases in both 2021 and 2022, expense growth is expected to be much more modest in 2023.