Presentation to the 2011 ABARE Outlook ConferenceAndrew Goldstein

March 1, 2011

Farm Profitability– The Canadian Experience –

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Structure of Canadian Primary Agriculture

Distribution of Farms by Sales Class

65%(Less than

$100,000)

25%($100,000 to

$499,999)

10%($500,000

and Over)

Distribution of Farms by Sales Class

65%(Less than

$100,000)

25%($100,000 to

$499,999)

10%($500,000

and Over)

Distribution of Operating Revenues

by Sales Class

8%(Less than

$100,000)

25%($100,000 to

$499,999)

67%($500,000

and Over)

Distribution of Operating Revenues

by Sales Class

8%(Less than

$100,000)

25%($100,000 to

$499,999)

67%($500,000

and Over)

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Farm size matters… to a point

Percentage of Farms Breaking Even by Farm Type – Excluding Program Payments (Average 2003-2008)

0

10

20

30

40

50

60

70

80

90

100

Less than$10,000

$10,000 to$99,999

$100,000 to$249,999

$250,000 to$499,999

$500,000 to$999,999

$1,000,000 andOver

Revenue Class

Per

cent

of F

arm

s

Percentage of Farms Breaking Even by Farm Type – Excluding Program Payments (Average 2003-2008)

0

10

20

30

40

50

60

70

80

90

100

Less than$10,000

$10,000 to$99,999

$100,000 to$249,999

$250,000 to$499,999

$500,000 to$999,999

$1,000,000 andOver

Revenue Class

Per

cent

of F

arm

s

Cattle

PoultryDairy

Grains

Hogs

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Farm size matters… to a point

Percentage of Farms Breaking Even by Farm Type – Including Program Payments (Average 2003-2008)

0

10

20

30

40

50

60

70

80

90

100

Less than$10,000

$10,000 to$99,999

$100,000 to$249,999

$250,000 to$499,999

$500,000 to$999,999

$1,000,000 andOver

Revenue Class

Per

cent

of F

arm

s

Percentage of Farms Breaking Even by Farm Type – Including Program Payments (Average 2003-2008)

0

10

20

30

40

50

60

70

80

90

100

Less than$10,000

$10,000 to$99,999

$100,000 to$249,999

$250,000 to$499,999

$500,000 to$999,999

$1,000,000 andOver

Revenue Class

Per

cent

of F

arm

s Cattle

PoultryDairyGrains

Hogs

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Significant profitability gap betweentop and bottom performers

Average Net Operating Income(2003-2008)

-20

0

20

40

60

80

100

120

140

160

180

2003 2004 2005 2006 2007 2008

NO

I ($/

Acr

e)

Bottom 20%Top 20%

Average Net Operating Income(2003-2008)

-20

0

20

40

60

80

100

120

140

160

180

2003 2004 2005 2006 2007 2008

NO

I ($/

Acr

e)

Bottom 20%Top 20%

Note: Sample of Grain and Oilseed farms in with over 1000 acres and over $100K in revenue.

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Top performers have higher revenues per acre

Note: Sample of Grain and Oilseed farms in Saskatchewan’s Brown soil zone with over 1000 acres and over $100K in revenue. Farms ranked by average PM from 2003 – 2008.

Comparison of the Revenue Composition of Producers(2003-2008)

0

20

40

60

80

100

120

Cereals Oilseeds Pulses

$/A

cre

Bottom 20%Top 20%

Comparison of the Revenue Composition of Producers(2003-2008)

0

20

40

60

80

100

120

Cereals Oilseeds Pulses

$/A

cre

Bottom 20%Top 20%

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Controlling costs is a key success factor

Note: Sample of Grain and Oilseed farms in Saskatchewan’s Black soil zone with over 1000 acres and over $100K in revenue. Farms ranked by average PM from 2003 – 2008.

Comparison of Expense Outlays of Producers(2003-2008)

0

10

20

30

40

50

60

Fertilizer Pesticide Seed Fuel andMachinery

Other Expenses

$/A

cre

Bottom 20%Top 20%

Comparison of Expense Outlays of Producers(2003-2008)

0

10

20

30

40

50

60

Fertilizer Pesticide Seed Fuel andMachinery

Other Expenses

$/A

cre

Bottom 20%Top 20%

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Off-farm income is playing an increasing role

Comparison of the Incidence of LFI and NNFI(1983-2003)

0

10

20

30

40

50

1983 1987 1993 1997 2003

Per

cent

Comparison of the Incidence of LFI and NNFI(1983-2003)

0

10

20

30

40

50

1983 1987 1993 1997 2003

Per

cent

Negative Net Farming Income (NNFI)

Low Family Income (LFI)

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Farm net worth has increased significantly

Average Farm Net Worth(2003-2008)

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

$1,200,000

$1,300,000

$1,400,000

$1,500,000

2003 2008

Unprofitable

Profitable

Average Farm Net Worth(2003-2008)

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

$1,200,000

$1,300,000

$1,400,000

$1,500,000

2003 2008

Unprofitable

Profitable

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Primary Agriculture: Part of a Broader SystemThe Canadian Agriculture and Agri-Food System

(2008)

Input Suppliers$24 B

Consumer Spendingon Food and Beverages

$147 B

Primary Agriculture$42 B

Food Processing$88 B

Food Retail/Wholesale$96 B

Foodservice$51 B

Agriculture andAgri-Food Sector

Imports$7.9 B

Exports$21.2 B

Imports$18.5 B

Exports$17.1 B

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