Crops and livestock

Severe drought conditions in western Canada contributed to an overall decline in revenue for farmers in 2002. Farm cash receipts—total revenue to farmers from agricultural commodities and program payments—fell for the first time in four years. This decline underscores the financial problems faced by many producers, particularly those in western Canada.

Alpacas Photo: Julie Savoie

In total, Canadian farmers received $35.8 billion from livestock and crop sales and program payments. This was a decline of 1.5% from the record $36.3 billion in 2001.

Crop receipts increased, rising 4.8% to $14.4 billion, somewhat surprising given severe drought conditions that hammered crops in parts of western Canada. However, revenues from crops fell 6.4% in Saskatchewan and 6.5% in Alberta. In both cases, production of wheat, barley and canola was hit hard by drought.

Livestock revenues fell for the first time since 1998, as prices for the major commodities slumped after peaking in 2001. Program payments fell 9.1% to $3.4 billion, even though crop insurance payments hit record levels in response to poor growing conditions and to an increase in the acreage of crops insured.

Nationally, farmers received $18 billion in livestock receipts, down 4.6% from 2001, but 12.3% higher than the previous five-year average from 1997 to 2001. Abundant supplies of red meat on the North American market, as well as higher feed grain costs, put pressure on cattle and hog prices. This followed several years of substantial growth in cattle and hog production.

Hog receipts fell 14% to $3.3 billion, as prices slumped below the previous five-year average. Nearly all the decline was a result of a 19.8% decrease in slaughter hog prices, which more than offset a 6.9% rise in livestock sales. The softer prices resulted from an abundant supply of pigs on the North American market, along with concern about the impact of the 2002 drought on feed grain prices, which continued to rise.

Cattle and calf receipts fell 3.5% to $7.5 billion in 2002, halting six straight years of increases. Prices decreased 7.1%, and livestock sales rose only 3.8%. The drop in cattle and calf receipts was largely due to a decline in receipts for slaughter cattle and for calves sold interprovincially, as prices tumbled for both. However, cash receipts for cattle and calves sold internationally continued to grow, driven by a record outflow to the United States.

High feed costs and dry conditions in portions of the Prairies had an impact on farmers' decisions to ship more cattle south of the border for feeding, finishing and slaughter. Other factors were favourable exchange rates and general growth in American demand for beef. Alberta cattle producers, in particular, felt the effect of dwindling feed supplies and soaring feed prices as they sold a record 3.1 million head for slaughter, feeding and export in 2002, substantially reducing their inventories.

Farm stocks of major grains and oilseeds dwindled to extremely low levels by the end of 2001, primarily as a result of the drought that summer. This led to reduced deliveries in the first part of 2002. As drought hit large parts of Saskatchewan and Alberta for a second consecutive year in 2002, deliveries for major grains and oilseeds continued to decline. Prices averaged much higher in 2002, but failed to offset a drop in grain and oilseed deliveries to the market.

Receipts for wheat excluding durum fell 8.2% to $2.5 billion, driven by plunging deliveries. Barley receipts dropped 25.2% to $546 million, as sales declined one-third and producers received lower wheat board payments. Receipts from canola fell 5.1% to $1.6 billion.

The decrease in receipts for most of the major grains and oilseeds was partly softened by higher liquidations of deferments.

In contrast, potato receipts rose 31.0% to a record $947 million, the result of export demand for fresh and processed potato products. Prices soared 29.2%, mostly the result of a large decline in production of table potatoes in 2001, which tightened available supplies in the first half of 2002.

Producers in eastern Canada had much better growing conditions in 2002, and capitalized on the higher grain prices. At the national level, receipts for grain corn and soybeans recorded increases, as prices for the two commodities were up 15.1% and 12.6%, respectively. Corn sales rose 12.1% in 2002, the result of above-average production in 2001 and 2002.

The 9.1% decline in program payments occurred despite record crop insurance payments resulting from poor growing conditions and an increased acreage insured. Total payments, however, remained 53.9% above the previous five-year average. Most of the decline occurred because of the expiry of one-time emergency assistance payments implemented in 2001.

Crop insurance payments soared to a record $1.5 billion, up 43.4% from 2001 and almost triple the previous five-year average. These payments continued at record levels into the first quarter of 2003.