Question Period Note: FARM INCOME SITUATION FOR 2024 AND 2025

Q1 – How are the recent shifts in U.S. and Chinese trade policies expected to impact producers’ economic situation in 2025? Q2 – Many farmers have seen large increases in expenses in recent years. How has this impacted their bottom line? Q3 – Which expenses have seen the largest increases in recent years? Q4 – How are the recent weather and climate challenges impacting farmers’ economic stability in 2025? Q5 – What is the Government doing to support farmers during this challenging period?

R.1 - It is likely that tariff increases would negatively impact exports, pressuring prices, and they could further disrupt global supply chains, adding to production costs. More generally, changes in the trade environment are expected to increase overall uncertainty for producers.

Other sources of uncertainty also exist, such as growing conditions in the upcoming year and continuing geopolitical shocks which, combined with adverse trade policy shifts, could increase global commodity prices and weaken steady global economic growth and demand. The resulting inflationary pressures could also increase farm input costs. R.2 - Generally, overall income has remained strong in recent years, as increasing global crop prices in 2021 and 2022, and higher crop marketings and strong cattle prices in 2023, helped offset the elevated input costs. Overall, expense growth in 2024 was much more moderate, increasing only 2.4 per cent, however incomes fell as grain receipts continued to decline. However, higher incomes from 2020 to 2023 have put most farms in solid financial positions such that weathering a period of lower prices and incomes is possible.
While the overall financial situation is solid, the economic impacts of these changes have not been evenly distributed between sectors or regions, and the situation for many producers may be different. R.3 - Fuel, fertilizer, and feed expenses saw sharp increases in 2021 and 2022, as the economy recovered from the pandemic with rising global inflation. Subsequently, Russia’s war against Ukraine significantly disrupted global commodity markets even further. These expenses moderated in 2023 and have generally been declining since.

Interest expenses also increased in 2022 as the Bank of Canada raised rates to fight inflation and saw further increases in 2023 and 2024. Livestock purchases have also increased in recent years due to higher animal prices. R.4 - Based on the results of Statistics Canada’s November Farm Survey of crop production, 2024-25 production of all principal field crops is estimated to have increased 2.7 per cent year over year, which would be 3.3 per cent above the previous five-year average, despite very dry conditions at the beginning of the growing season in Western Canada. While the overall size of the crop improved in 2024, we understand that producers in some regions may have still struggled with challenging growing conditions and weather instability. R.5 - Federal and provincial governments continue to provide support through the business risk management programs to help producers manage risks (for example, drought, flooding, market declines and increased input costs). Producers are also supported by programs such as the Advance Payments Program, Agriculture Climate Solutions - On-farm Climate Action Fund, Resilient Agricultural Landscape Program, Poultry and Egg On-Farm Investment Program, Agriculture Clean Technology Program, as well as other Grant and Contribution programs.

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 28, 2025, Statistics Canada (STC) reported that NCI in 2024 was $19.7 billion (B), down 14.9 per cent from the record 2023 level of $23.1B. The key drivers of the change are as follows:
Total farm cash receipts (FCR), which include crop receipts, livestock receipts and program payments declined 1.6 per cent. Total crop receipts were down 6.2 per cent (-$3.5B), primarily due to lower prices for most major grains and oilseeds. Over half of the decline can be attributed to lower wheat (excluding durum) receipts as prices fell 20.4 per cent. This was the first decline in crop receipts since 2014. Livestock receipts increased 6.9 percent (+2.6B) in 2024, primarily due to robust cattle prices which were up 13.1 per cent over 2023 levels on strong demand and tighter cattle supplies.
Lower program payments (-10.8 per cent) also contributed to the decline in FCR in 2024, a decline in crop insurance payments as well as lower stabilization payments in Quebec and lower dairy direct program payments were behind the decrease, offsetting higher AgriStability payments.
Operating expenses in 2024 were up a modest 2.4 per cent to $78.3B, primarily due to higher interest expenses (+28.6 per cent), offsetting declines in feed and fertilizer expenses. An increase in livestock purchases and higher labour costs also contributed to the rise. This was the smallest increase in expenses since 2016 (+1.2 per cent).
The outlook for 2025 is still very uncertain. AAFC’s earlier farm income forecast for 2025, published in February 2025 and based on conditions and data as of December 2024, forecasted a decline of 15 per cent for NCI in 2025. That forecast is no longer current, but general expectations based on the latest data suggest that farm income is still expected to see a decline in 2025, even though revenues were up in the first quarter. Based on data from the same STC data release on May 28, 2025, FCR in first quarter of 2025 rose 3.1 per cent to $25.6B. The gains were entirely due to a 14 per cent rise in livestock receipts as crop receipts were flat (-0.1 per cent), while program payments fell 25.2 per cent to $1.6B on lower crop insurance payments. Strong gains in cattle (+21.3 per cent) and hog (+20.9 per cent) receipts were mostly behind the jump in livestock receipts.
The recent U.S. and Chinese tariffs, and the pending outcome of the China anti-dumping investigation into canola, represent significant uncertainty for the agriculture sector in 2025. The extent to which they may impact the farm income situation for 2025 is still very uncertain, as it is unclear how these situations will evolve, although it is expected they would have a negative impact on farm income.

• A financially healthy agriculture sector is critical to Canada’s economic well-being.

• As global crop prices continued to fall from recent peaks, net cash income declined 15 per cent in 2024 to $19.7 billion. However, it remained above the previous five-year average.

• The impacts of changing economic conditions are not evenly distributed among producers. For example, while grain prices are down, cattle prices have been very strong in recent years.

• The current trade situation is causing significant uncertainty for producers in 2025. The Government is committed to working with its trade partners to maintain market access for agricultural products and supporting producers.