Manitoba Agriculture, Food and Rural Initiatives

Grains and Oilseeds Commentary

March 9, 2010

In 2009 farmers benefited from a substantial improvement in cash income in large measure due to strength in the crops sector as accumulated inventories were marketed and input costs moderated slightly.  Net income values reflecting inventory swing are projected to be the lowest since 2006.

The current economic situation for Manitoba’s agricultural sector is a static condition in total farm cash receipts, estimated at $4,763 million in 2009 and virtually unchanged from 2008.  Direct payments are expected at $379 million in 2009, an increase of 8% from one year earlier.  Net cash income is projected at $1,064 million in 2009, a rise of 32% from $809 million in 2008, led by the crops sector.  Realized net farm income adjusted for depreciation is estimated at $547 million in 2009, up 158% from 2008.  Total net income (adjusted for depreciation and inventory change) is anticipated to be $542 million in 2009 dropping 33% from 2008 due to $506 million swing in inventory.  The industry experienced a larger net cash income in 2009 relative to the previous year, largely derived from the sale of the crop inventory which comes from the exceptional 2008/09 crop that had good yields and strong prices.

While 2009 crop prices and yields were below the 2008 level, yields were around normal levels and prices were above previous average levels.  Crop receipts are estimated at $2,786 million in 2009 led by canola, wheat and barley.  The 2009/10 wheat crop is estimated at 4.0 million tonnes, a decrease of 7% from 2008/09 mainly due to a return to more normal yields.  With wheat prices down approximately 20% from 2008, income from wheat in 2009 is estimated at $608 million, a drop of 5% from the previous year.  The barley crop in 2009/10 is expected at 958,000 tonnes, a 15% decrease from 2008/09 due to a 22% reduction in area despite a 9% rise in yield.  Barley prices have decreased 16% from 2008 and income from barley in 2009 is estimated at $68 million, a drop of 28% from the previous year.  Grain corn production in 2009/10 grain corn production is projected at 363,000 tonnes, a drop of 23% from 2008/09 due mainly to a 21% decrease in yield and 3% decrease in area.  With corn prices down 21% from 2008, income from corn in 2009 is estimated at $52 million, a decrease of 9% from a year earlier.  The canola crop for 2009/10 is estimated at 2.8 million tonnes remains well above the 10 year average of 1.7 million tonnes. It is 8% above 2008/09 record production due to a 3% increase in area and 8% rise in yield.  With canola prices down 14% from 2008, income from canola in 2009 is estimated at $1,116 million, up 11% from the previous year.  The 2009/10 flaxseed crop is estimated at 193,000 tonnes, an increase of 20% from 2008/09 mainly due to a 12% increase in area and an 8% rise in yield.  With EU import restrictions, flax prices fell 32% from 2008 and income from flax in 2009 is estimated at $38,000, down 45% from the previous year.

Farm operating costs in 2009 are estimated at $3,699 million, a 7% reduction from $3,957 one year earlier.  This is due to several factors: a 30% drop in fertilizer expenses due to price reductions and to a lesser degree, lower usage; a 20% decrease in machinery operation and fuel expenditures due to lower fuel prices; a 13% reduction in interest expenditures mainly due to interest rates; and fertilizer and fuel costs are significantly above the previous average.