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Farmers rake in cash amid high prices

August 26, 2008

From the middle of a Saskatchewan canola field, where he was swathing his crop yesterday, farmer Glenn Blakley paused to take stock: "The sun is shining, it's a beautiful day, a person couldn't be any better."

He ruminated over the news, reported by Statistics Canada yesterday, that total market receipts for Canadian farmers reached a record $19.9-billion in the first half of this year, and said he was "cautiously optimistic."

Still, Mr. Blakley noted, rapidly escalating farm operating costs – particularly for fertilizer, pesticides and fuel – are cause for concern.

"It's not surprising that the first half of this year is at record high levels, because we have never seen the kind of prices farmers are receiving, for their grains and oilseeds in particular. But all the costs have increased to levels that we haven't witnessed before either," said Mr. Blakley, who also grows wheat, barley, flax and operates a beef herd.

"At the end of the day, it doesn't matter what your gross receipts are, it's your net return that actually feeds the family and pays the bills," said Mr. Blakley, who saw his fertilizer costs climb from $450 a tonne two years ago to $650 a tonne this past spring. "Right now, I'm hearing quotes of $1,000 a tonne."

Statscan reported yesterday that crop receipts were up 30.8 per cent "and stood 56.9 percent above the previous five-year average for a January-to-June period, largely due to higher prices resulting from tight world grain supplies and strong demand." However, livestock receipts were down 4.3 percent to $8.8-billion in the first half of this year, with hog producers taking the biggest hit as the higher Canadian dollar continued to pressure prices downward.

Ian Wishart, who grows wheat, oats, barley and canola at his farm in Portage La Prairie, Man., was cutting alfalfa for export to the U.S. market yesterday. He concurred with Mr. Blakley that the situation for Canadian farmers is not as rosy as the Statscan numbers might suggest.

"There's a couple of things in the report that aren't immediately evident. The base period that they are working off, the previous five years, included three of the worst years that farmers have ever had," said Mr. Wishart, president of Keystone Agricultural Producers, which represents Manitoba farmers.

"It's good to see revenue up, particularly in the grains sector … but expenses have absorbed a big chunk of that, without a doubt," he said.

Farm cash receipts measure gross revenue for farming operations, Statscan noted. "They do not represent their bottom line, as farmers have to pay their expenses and loans and cover depreciation."

Total market receipts were up 56.7 percent for wheat from the first half of 2007, barley was up 60.7 percent, canola was up 54.4 percent and corn was up 42.5 percent.

On the cost side, Mr. Blakely, also president of the Agricultural Producers Association of Saskatchewan, said soaring fertilizer costs are creating the biggest hardship for Canadian crop producers. With fertilizer prices projected to go even higher next year, some fertilizer suppliers are pressuring farmers to lock in at today's prices and buy fertilizer now for their 2009 crops.

He said farmers are receiving about $8 a bushel for their wheat – the break-even point. Canola prices have dropped from about $16 a bushel this spring to the current $11-to-$12 range, he said.

"I have talked to guys who figure if they don't have $11 next year for canola, they won't make any money."