In 2011, Canadian producers will see net incomes increase as both crop and livestock markets exhibit strength beyond what was foreseen earlier in the year. At the same time, program payments are forecast to increase in response to regional and sector-specific events such as excessive moisture conditions in the West. This significant improvement in the outlook for farm cash receipts will more than offset higher operating expenses.
Net Cash Income at the sector level will reach $11.7 billion in 2011 while farm-level average net operating income will be $65,129. Both measures show farm income surpassing the record levels seen in recent years.
In 2012, our preliminary forecast shows a continued positive situation, as total market receipts will increase more than expenses, resulting in higher net farm income derived from market sources.
After years of decline, the strong livestock prices seen in 2010 are expected to continue in 2011 at even higher levels. Tight cattle supplies in North America along with strong beef demand are projected to push prices up. However, the appreciation of the Canadian dollar will partly mitigate this upward pressure on prices. The strong dollar and Canada's feed cost advantage over the U.S. are likely to reduce cattle exports to the U.S. With regard to hogs, herd numbers are stabilizing in 2011. Prices have increased substantially, but high feed costs and uncertainty surrounding demand are expected to inhibit expansion.
Aggregate farm cash receipts for livestock are forecast to be a record $20.6 billion, which is a 9% increase over 2010 and is 12% higher than the 2006-2010 average. This is due to strong prices for cattle and hogs.
The average cattle farm's net operating income is expected to decline by approximately $2,400 in $8,265, a one-year drop over the course of several years of steady incomes. While market receipts are expected to climb, this will be more than offset by a significant increase in operating expenses in 2011, driven byfeed costs. Meanwhile, program payments are expected to fall. Incomes are forecast to return to recent historical levels in 2012.
For the average hog farm, net operating income in 2011 should reach a new high of $145,782. While program payments are expected to drop by 27%, a price rebound will help market receipts climb by 20%, and this will more than offset an 11% increase in expenses driven by feed costs.
The average dairy farm net operating income is forecast to rise by 7% to $142,778 in 2011. As market receipts have generally kept pace with expenses and the average size of operations has increased, the average farm's profits have followed a slow but steady upward path in recent years.
Poultry and egg farms on average will see the highest net operating income of all livestock farm types at $196,103. This is 21% higher than in 2010 and is driven in part by a significant price increase for those products, as rising grain costs boosted feed costs.
Strong livestock prices are expected to continue in 2012. Cattle and hog herd numbers are projected to stabilize. Strong cattle demand in the U.S. is expected to carry into 2012 along with tight supplies, which will push prices up. In Canada, cattle prices are projected to increase modestly given the strong dollar while marketings are expected to remain stable. Nonetheless challenges remain for the cattle and hog sectors given the high feed costs and the strong Canadian dollar. The hog sector will face the additional challenge of uncertainty surrounding future demand for pork.
Aggregate farm cash receipts for livestock are projected to reach $21.1 billion, an increase of some $546 million or 3% over the previous year. More than half of this increase will come from cattle and calves.
The average cattle farm in 2012 is expected to earn a net operating income of $10,213, an increase of some $2,000 from 2011 as market receipts driven by price will increase modestly and outpace higher expenses.
Hog farms on average will earn a net operating income of $116,347, which is 20% down from levels in 2011. The largest factor behind this is an increase in expenses.
Dairy farm average net operating income is forecast to increase by 6% to $150,704, as increased market receipts more than offset growth in expenses.
Poultry and egg farms should earn an average net operating income of $218,448 in 2012. This is an 11% increase from the previous year and results from growth in market receipts outpacing growth in expenses.
Monday February 20, 2012/ Agriculture and Agrifood Canada/ Canada.