Agriculture and Agri-Food Canada's Farm Income Forecast is a key tool for monitoring income that is used to understand the short-term outlook for agriculture in the farming sector.
Net Cash Income (NCI), which is the difference between cash receipts and operating expenses, is the main metric that Agriculture and Agri-Food Canada uses to measure farm income. Despite inflationary pressures for many farm inputs, the agriculture sector is forecasted to have NCI grow modestly in 2022 due to higher agricultural commodity prices, which follows significant growth in both 2020 and 2021.
Agriculture in Canada continues to show overall positive performance
NCI is forecasted to have grown modestly for the primary agriculture sector from $22.9 billion in 2021 to a new record of $23.2 billion in 2022. Increases in market receipts and program payments are projected to have outpaced increases in expenses and crop production losses.
This increase in receipts is due to higher global prices for commodities driven by Russia’s war against Ukraine and weather-reduced crop supplies in some key growing areas around the world. Strong grain prices are expected to have offset the low levels of stock available for sale early in 2022 due to the drought in Western Canada in 2021, boosting grain receipts to a higher level. Higher cattle prices are also expected to have contributed to overall higher livestock receipts. Additionally, program payments are forecasted to have had a strong increase in 2022, up 14.5% compared to 2021, largely due to higher AgriInsurance payments driven by the drought-related losses in 2021.
Operating expenses are forecasted to have increased substantially in 2022, as prices for key inputs increased, driven largely by inflation. However, increases in receipts are expected to have overshadowed the increases in expenses.
Average Net Operating Income (NOI) per farm, which measures producers’ revenue less cash expenses at the farm level, is also forecasted to have risen modestly in 2022. Average NOI per farm is forecasted to have increased to approximately $136,000 in 2022 - up 2.9% from 2021 and 43.9% higher than the 5-year average. However, the small overall increase in NOI masked uneven impacts across different sub-sectors. Apart from grains and oilseed, dairy, and potato farms, most other farm types are expected to have seen a decline in income from their 2021 highs, due to higher expenses. However, average farm family income is forecasted to have increased 6.9% in 2022 to $232,000. Average net worth is also forecasted to have increased by 3.3%, to $3.8 million per farm in 2022.
Outlook for 2023
Forecasts for 2023 are subject to several uncertainties due to the elevated amount of volatility in the global markets as well as the impact of weather events. That said, based on information available as of December 2022, higher grain marketings (quantities sold) are expected in 2023 due to a rebuilding of total supply in Canada due to a strong total 2022 crop production, which was the third largest crop on record. Global crop prices are forecasted to remain relatively strong, though down from the elevated levels of 2022.
Declining North American cattle supplies are expected to support livestock prices and receipts. Farm expense growth is forecasted to slow down due to expected lower crop and energy prices. As such, NCI is forecasted to increase 11.8% to $25.9 billion in 2023. Farm-level income is also expected to see a comparable rise of 14.8% to $156,610.
- Net Cash Income (NCI) is forecasted to have risen marginally in 2022 following an over 30% year-over-year growth in both 2020 and 2021. NCI is forecasted to further increase in 2023 to a substantial new record.
- Price growth was the main driver of increases in receipts and expenses in 2022. Most prices are not expected to see the same peaks in 2023, but many major commodities prices are expected to stay at relatively high levels. Crop marketings are expected to be higher as a result of a rebuilding of total supply due to a significant increase in yields in 2022.
- Despite positive overall performance, there were still several significant challenges in 2022. In addition to COVID-19 continuing to pressure global supply chains and the inflationary effects from Russia’s war against Ukraine and rising input costs, there was the drought in Western Canada in 2021 which significantly reduced crop marketings in the grains sector in 2022.
- Global inflation is expected to soften somewhat in 2023 reducing input-cost pressures. However, with Russia’s ongoing war against Ukraine, supply-chain challenges, as well as drought and other weather events threatening crops worldwide, market volatility remains.
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