Canada net farm income up on grain prices

Tue May 27, 2008 8:39am EDT
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TORONTO (Reuters) - After two years of declines, total net income for farmers in Canada more than doubled last year because of higher grain and oilseed prices, according to a report released on Monday.

Statistics Canada said that realized net income -- the difference between cash receipts and operating expenses, minus depreciation -- rose to C$1.7 billion ($1.7 billion) in 2007 from C$771 million in 2006, which was a 2-percent jump above the previous five-year average.

Nationwide, producers faced an 8.2 percent increase in farm-operating expenses, which was the fastest rate of growth since 1981, and 14 percent higher than the previous five-year average.

Grain and oilseed prices continued on an upward trajectory in 2007, bolstered by rising food demand in emerging economies and the increasing production of biofuels.

Alfons Weersink, an agricultural economist at the Ontario Agricultural College in Guelph, Ontario, said crop prices are likely to remain high.

"On the revenue side it looks good, but it's hard to know the extent to which margins will be narrowed because of rising costs, particularly in energy-related costs," he said in an interview.

The surge in prices and the soaring Canadian dollar hit livestock producers with added strain, causing feed and fertilizer costs to soar by 21.8 percent.

"It was bad enough for the hog sector that they announced a cull program, they being the government, to liquidate some of the herds, and that was a way of easing the transition out of hog farming," Weersink said.

Province-by-province, the income gains were concentrated in Quebec and the Prairie provinces, while net income levels in British Columbia, Ontario and the Atlantic provinces dropped to "extremely low levels," the report said.

($1=$0.99 Canadian)

(Reporting by Ashleigh Patterson; Editing by Peter Galloway)

<p>Canadian wheat grows in a field near Teulon, Manitoba, July 26, 2006. REUTERS/Shaun Best</p>