Driven by the introduction of genetically-modified crops into Argentina a decade ago, soya production has rocketed to a record 40m tonnes in the last season, and the country is the world's biggest producer of soya oil – a prime raw material to make biodiesel.

Sugar and cereals are used to make ethanol, which Brazil has turned into a major industry. Currently, almost half Argentina´s exports are derived from farming and 20 percent are direct exports of raw materials, so biofuels – which sell for around 70 per cent more than the plain oil – represent a way of adding value to abundant output from Argentina´s primary sector.

"We´re building three [biofuels] plants. We dismantled our previous one as it couldn´t expand any more," said Jorge Kaloustian, whose company Oil Fox is one of Argentina´s biofuels pioneers. He expects to be back in production in October, with output of 400m litres a month, rising to 50m by the middle of next year. Part of that will come from a $20m plant that he says will be the biggest in the world and is due to start up next February.

And it doesn't stop there. Spanish major Repsol-YPF, one of the biggest oil energy companies in Argentina, is planning to open a $30m plant next year with capacity of 100,000 tonnes in the first year.

Argentine edible oils producer, Aceitera General Deheza, is eyeing a $40m investment to build a 200,000 tonne plant, probably near the city of Rosario, north of Buenos Aires, which is the centre of Argentina´s soya processing industry and home to the world´s highest concentration of soya bean crushing plants.

Vicentin, another oils producer, is also studying a $25m plant where it hopes to be able to produce 300,000 tonnes a year. Among foreign companies eyeing Argentina´s potential is U.S.-based Imperium Renewables, though it is keeping its plans under wraps. Argentine farmers are major diesel consumers but there is little scope to expand domestic biodiesel use because it cannot compete with state subsidized fuel.

However, demand will grow because of a law passed in April requiring fuels sold at filling stations to contain 5 per cent of biofuels, which comes into effect in 2010. But just as Argentines sell abroad most of the soya their country produces, exports are the engine driving the potential of biofuels.

"In maybe five years, Argentina will be able to export 1.5m tones [a year]," said Miguel Almada of the Agriculture Department´s biofuels programme. Argentina currently produces an estimated annual 30,000 tonnes.

Officials are still working out the fine print of how to apply the April law – including, crucially, the tax regime. Unpopular export tariffs on agricultural exports designed to keep inflation at bay could prove a disincentive to investors.

But Argentina´s low production costs and vast amounts of agriculturally active land make it an attractive prospect, and producers say supply is not a worry. "With 5 percent of [oil] available, we can supply our plants easily," said Kaloustian. Almada said 40 percent of the 600,000 tonne initial requirement for the biofuel blend required in 2010 could be covered simply by collecting soya lost in the harvesting process.

"One of our concerns is that biofuels look very attractive today but all these plants could come online just as oil prices start to come off," said Jed Bailey, managing director for Latin America at Cambridge Energy Research Associates. But that would not mean the demise of green fuels, just slower progress, he said.

Copyright The Financial Times Ltd

Farm Product Price Index
(1997=100)
	June 2005r	May 2006r	June 2006p	June 2005 to June 2006	May to June 2006
				% change
Farm Product Price Index	96.5	95.7	96.0	-0.5	0.3
Crops	88.5	84.7	82.8	-6.4	-2.2
Grains	75.3	65.6	66.0	-12.4	0.6
Oilseeds	83.0	70.3	71.0	-14.5	1.0
Specialty crops	91.3	75.3	79.9	-12.5	6.1
Fruit	111.4	106.6	92.8	-16.7	-12.9
Vegetables	111.0	112.9	113.0	1.8	0.1
Potatoes	116.0	157.0	161.6	39.3	2.9
Livestock and animal products	103.1	105.3	107.3	4.1	1.9
Cattle and calves	100.0	112.8	115.6	15.6	2.5
Hogs	85.6	74.6	80.3	-6.2	7.6
Poultry	99.4	94.5	94.6	-4.8	0.1
Eggs	95.6	97.9	97.9	2.4	0.0
Dairy	124.9	128.6	127.4	2.0	-0.9
r revised p preliminary

Data from the annual July Farm Survey of 17,600 farmers, conducted from July 28th to August 6th, indicated that there is a concern about the effects of recent drought-like growing conditions in the Prairie provinces.

After an optimistic spring that allowed timely seeding with average rainfall in most areas, continuous hot and dry weather in July stressed crops and accelerated development. Farmers have since pared back high yield expectations to a more normal range.

In north-east Saskatchewan, many farmers were unable to complete seeding because of too much rain during planting that flooded their fields for weeks. Production estimates in Manitoba are anticipated to rebound strongly in 2006 after the excessive wet conditions that devastated crops in 2005.

In Quebec and Ontario, continuous high temperatures have accelerated crop maturity and, despite too much rain in some areas, producers expected there will be above-average yields this year for most major crops.

Production estimates, July 31
Crop	2005	2006	2005 to 2006
	thousands of tonnes		% change
Total wheat	26,775	25,925	-3.2
Spring wheat	18,788	19,032	1.3
Barley	12,481	10,287	-17.6
Grain corn	9,461	8,960	-5.3
Canola	9,660	7,977	-17.4
Oats	3,432	3,776	10.0
Winter wheat	2,072	3,475	67.7
Durum wheat	5,915	3,418	-42.2
Soybeans	3,161	3,163	0.1
Dry field peas	3,100	2,784	-10.2
Flaxseed	1,082	978	-9.6

Prairie canola production expected to fall

Prairie farmers reported that they expect to harvest 7.9 million tonnes of canola, down 1.6 million tonnes from the 9.5 million tonnes in 2005. Production would remain well above the 10-year average of 6.8 million tonnes. The decline would be due to a drop in yield from an estimated 32.6 bushels per acre to 27.2 bushels per acre. Harvested area is expected to remain the same.

Farmers in Saskatchewan and Alberta reported similar expectations with respect to this year's crop. Saskatchewan production could fall 22.9% to 3.6 million tonnes, while Alberta farmers expect a 22.5% decline to 2.8 million tonnes. In Manitoba, increases in harvested area and yield could propel anticipated production to 1.5 million tonnes, on par with the recent 10-year average.

Flaxseed production declines

On the Prairies, flaxseed production could fall 9.6% to 977,200 tonnes. This is the result of an anticipated drop in yield from 21.5 acres per bushel in 2005 to 18.7 bushels per acre in 2006, a return to the 10-year average.

Producers in Saskatchewan and Alberta reported lower flaxseed production, while Manitoba farmers reported a slight increase.

Spring wheat production up slightly

Prairie farmers expect to harvest 18.6 million tonnes of spring wheat, up just 1.2% from 18.3 million tonnes in 2005. The 10-year average is 17.6 million tonnes. Harvested area could rise by 2.6 million acres but yield is anticipated to fall from 39.7 bushels per acre to 34.8 bushels per acre.

The spring wheat harvest in Alberta could fall 7.0% to 6.8 million tonnes. Saskatchewan farmers reported an unchanged estimated production of 8.7 million tonnes, the result of a lower yield but similar increase in harvested area. Manitoba farmers reported a 30.1% increase in production to 3.0 million tonnes, owing to a rebound in yield and harvested area from 2005.

Durum production tumbles

Durum wheat production in the Prairies is expected to fall 42.2% to 3.4 million tonnes, off 2.5 million tonnes from 2005. The 10-year average production is 4.7 million tonnes. The decline is the result of an average drop of 8.5 bushels per acre and 1.5 million fewer harvested acres.

Production in both Saskatchewan and Alberta should drop. In Saskatchewan, where over three-quarters of Canadian durum is grown, production could decline 2.1 million tonnes to an estimated 2.8 million tonnes.

Feed grain production mixed

Prairie barley production should fall 18.2% to 9.5 million tonnes, the result of declines in both yield and harvested area. The 10-year average production is 11.4 million tonnes.

Saskatchewan output is likely to drop 34.8% to 3.5 million tonnes and Alberta production is expected to fall by 12.5% to 4.9 million tonnes. Manitoba production was reported to have surged 65.2% to 1.1 million tonnes.

Oat production on the Prairies could rise 10.3% to 3.3 million tonnes, and come in line with the 10-year average of 3.1 million tonnes.

Provincially, oat production could decline by 1.5% in Saskatchewan and by 19.9% in Alberta, but rebound 114.2% to 943,800 tonnes in Manitoba.

Field pea production down on the Prairies

Field pea production should decline, the result of a drop in yield. Prairie production should decline to 2.8 million tonnes, off from 3.1 million tonnes in 2005. The 10-year average is 2.2 million tonnes.

Provincially, Manitoba production should edge up 1.6% to 63,500 tonnes. In Alberta, farmers reported a 3.1% increase, the result of more harvested area. In Saskatchewan, production could be down 13.8%, the result of a 5.8 bushel per acre drop in yield. However, potential harvested acres rose 100,000 acres to a record 2.7 million acres. Dry pea harvested area has been rising in Saskatchewan since 2003.

Ontario, Quebec farmers should produce less grain corn and soybeans

Farmers in Ontario and Quebec reported lower production, mainly the result of reduced yield estimates.

Quebec farmers estimate corn production to fall 14.5% to 3.0 million tonnes, an estimate not seen since 2001. This reduction would be the result of a smaller harvested area and a lower estimated yield. The 10-year average production is 2.9 million tonnes.

Soybean production in Quebec may also decline 1.0% from 2005 to an estimated 500,000 tonnes, the result of a drop of 1.3 bushels per acre in yield. The 10-year average production value is 384,700 tonnes.

In Ontario, production estimates for corn were down 1.8% to 5.7 million tonnes, the result of a 6.9 bushel per acre decline in yield. Production would remain well above the 10-year average of 5.4 million tonnes.

Soybean production may drop 6.8% from 2005 to an estimated 2.4 million tonnes, a value remaining well above the 10-year average of 2.1 million tonnes. This reduction would be the result of a decline of 165,000 acres of harvested area.

Ontario winter wheat a record

Winter wheat production in Ontario is expected to shatter all records in 2006. Production was estimated at 2.5 million tonnes, eclipsing the previous record of 2.1 million tonnes set in 2003. Harvested area and yield are both in record high territory. At the time of the survey, the majority of the harvest was complete.

Even so, it was still 814,000 above the level at July 1, 2002, prior to the border closure.

The American border was reopened to live cattle under 30 months of age on July 18, 2005. The ban on Canadian cattle and beef took effect after disclosure of a case of bovine spongiform encephalopathy (BSE) on May 20, 2003.

In general, inventories in the West rose during the early 1990s as farmers increased production in response to expanding export markets. With the door to the US markets closed, thousands of cattle were held back on Canadian farms, costing cattlemen dearly to feed them.

The Livestock Survey also showed declines in both hog and sheep inventories during the year. Farmers reported 1,156,000 sheep on their farms, down 4.4%.

Livestock inventories at July 1
	Cattle		Hogs		Sheep
	thousands of head
	2005	2006	2005	2006	2005	2006
Canada	17,060	16,250	14,941	14,485	1,209	1,156
Atlantic	295	291	336	323	48	47
Quebec	1,470	1,455	4,370	4,060	301	280
Ontario	2,300	2,204	3,710	3,600	310	302
Manitoba	1,755	1,720	2,940	3,024	78	65
Saskatchewan	3,625	3,450	1,395	1,340	142	142
Alberta	6,700	6,300	2,020	1,970	248	245
British Columbia	915	830	170	168	82	75
Note: Figures may not add up to totals because of rounding.

Exports of live cattle resume

Exports of live cattle to the United States rose rapidly once the border was reopened in July 2005. However, recently, monthly exports have tumbled as drought-stricken US ranchers shipped cattle early, pushing US slaughter up and prices down. Reduced US demand for Canadian cattle, coupled to lower prices in this country, partially due to a strong Canadian dollar, discouraged Canadian exports.

In the year up to July 1, 2006, total cattle exports amounted to 1,140,000 head, only 22% below the pre-BSE level. There were no exports during the two previous 12-month periods. In the year up to July 1, 2003, Canadian cattlemen exported 1,458,000 animals.

Once the border was reopened to cattle, beef meat exports declined, partially offsetting the higher cattle exports.

Part of the decline can be attributed to a three-week strike at a packing plant in Alberta in late October and early November 2005. Even so, the lower monthly exports have been sustained.

Cattle herd declines in all regions

Cattle numbers fell in all provinces, but the decline was more dramatic on the Prairies. The herd in Manitoba, Saskatchewan and Alberta, combined, plunged by 610,000 head, which accounted for three-quarters of the total decline up to July 1 this year.

Alberta's herd, the largest of any province, plunged 6.0%, Saskatchewan's fell 4.8%, and Manitoba's, 2.0%. In British Columbia, the herd dropped by 9.3%. In Central Canada, Quebec's cattle count edged down 1.0%, while Ontario's was 4.2% lower.

The Prairie provinces accounted for the vast majority of the increase in cattle numbers during the three-year period leading up to the July 1, 2005 record.

Combined, the herd in those three provinces rose by 1.3 million head during this time, accounting for 79% of the total 1.6 million nationwide gain.

Slaughter levels have also been a key factor in the cattle business. During 2004 and the first half of 2005, levels hit record highs. They were fuelled by increased slaughter capacity, domestic demand, strong international demand for Canadian beef and lower levels of beef imports.

However, levels have tapered off in the wake of lower exports of beef meat, now that the border is open to live cattle. Slaughter in the year up to July 1, 2006, was down 8.0% from the previous 12 months.

Cattle prices improved during the fall of 2005. Prices as of December 2005 amounted to 94% of prices experienced during December 2002, before the ban was imposed. However, prices have since slipped, partially coinciding with a stronger Canadian dollar.

Hog industry growth slows

Hog inventories remained lower during the second quarter of 2006, consistent with soft prices. Farmers reported 14.5 million hogs as of July 1, 2006. This was 3.1% below the same date last year, and, on a quarterly basis, down marginally from the first quarter of 2006.

Hog prices weakened in the fall of 2005, and have remained relatively low. Prices in the first six months of 2006 were about 19% below the comparable period in 2005.

Inventories in Eastern Canada fell 5.1%, substantially more than the rate of decline of 0.4% in the West. Hog production in Quebec and Ontario has been more adversely affected by disease than in normal years. Producers have been contending with a new strain of porcine circovirus along with other diseases, sometimes made worse by this virulent disease.

Exports of Canadian hogs, principally to the United States to be fed, were up 9.6% in the first half of 2006 from the same period the previous year. They were at historically strong levels. At the same time, domestic slaughter declined by 2.6%.

For many Canadian firms, bioproducts was a new business activity. About one-third had entered the bioproducts sector within the five years prior to the survey, mainly as a result of internal research and development projects.

Firms cited several benefits from their involvement in bioproduct activities, mainly increased sales and market share, and developing new market niches and new products.

In 2003, companies reported an average of 4.5 bioproducts per firm. About 60% of the bioproducts were already on the market, 18% were in mid-development, and 22% were in the early stages.

Many types of bioproducts were under development. The largest category was bio-chemicals, which made up 41% of all bioproducts under development or on the market.

Bio-fuels/bio-energy products were primarily being developed by large companies with 150 employees or more, likely due to significant resource requirements. Agricultural inputs were especially important in the production of bio-fuels.

A recent report commissioned by the Canadian Renewable Fuels Association noted that Canada produced just 250 million litres of bio-fuels in 2004, compared to the 12.9 billion litres in the United States.

However, domestic production of bio-fuels could increase to over 3 billion litres by 2010 (representing 5% of total gasoline consumption) in response to new provincial and federal targets dramatically increasing demand for agricultural inputs.

Prices for livestock and animal products were 1.0% lower in April than they were a year earlier. This was the third consecutive month of year-over-year decreases, driven mainly by lower hog prices.

Prices for crops edged up 0.6% in April over last year, the first year-over-year increase since the fall of 2004. Although producers received lower prices for grains, oilseeds and specialty crops, higher prices for potatoes, fruit and vegetables were recorded.

The Farm Product Price Index stood at 95.7 (1997=100) in April, up from the revised March index of 95.2.

Prices farmers received for crops were up 3.5% in April compared to March, as all major categories recorded increases except grains.

Potato prices rose in April, the sixth consecutive monthly increase; supported by an 18% drop in production last fall. Fewer contracts for processing potatoes and poor prices in 2004 led to an 8% drop in seeded acres. However, poor growing conditions last season further curtailed production.

Prices for oilseeds were up 0.6% in April, the second consecutive monthly increase. Oilseed prices had trended downward for almost two years, affected by burdensome supplies and a strong Canadian dollar. However, as the new crop year approaches, concerns over growing conditions in major production areas are starting to influence crop prices.

The grains index slipped 0.2%, the third consecutive monthly decrease. Grain prices have been plagued by record production, a strong Canadian dollar and quality-reducing growing and harvest conditions.

Prices for livestock and animal products slid 1.1% in April from the revised March index, as hogs, cattle and calves, and poultry all recorded a drop. The declines ranged from 0.4% for poultry to 4.8% for hogs.

After increasing for two consecutive months, hog prices fell again in April, continuing the declining trend that began last summer. The downward pressure has come from large North American supplies and the strong Canadian dollar. After dropping 0.7% in March, the first decrease since May 2005, the value of the Canadian dollar against the US dollar was up 1.7% in April.

Cattle and calf prices were down 1.5% in April. After increasing 14.5% last July, when the border reopened to trade of live animals (under 30 months of age), the month-to-month index changes have ranged from a decline of 2.2% to an increase of 2.7%.

Ottawa - On June 13 Wildlife Habitat Canada (WHC) released the results of the National Survey on Ecological Goods and Services. Over 1,700 Canadian farmers and ranchers were surveyed for their attitudes and behaviours towards ecological goods and services in an effort to inform policy development at the national level.

Ecological goods and services (EG&S) are the benefits that humans derive from healthy ecosystems. For example, habitats such as wetlands and forests promote human health by purifying our water, filtering our air and regulating our climate. Our ability to continue to benefit from these goods and services is greatly affected by habitat fragmentation, invasive species, pollution, population and over-exploitation. Increasingly, we see the potential for production of EG&S in the agricultural landscape through stewardship practices.

As anticipated, the survey results highlight that farmers and ranchers make considerable efforts to steward their land and mitigate environmental risks. These results are consistent with WHC's previous national surveys in 2000 and 2003 that explored rural landowners' attitudes and behaviours towards land stewardship. New information from this survey points to a perception amongst farmers and ranchers that their agricultural practices provide broader benefits to society, with 70 per cent of respondents seeing themselves as "part of the solution." While respondents felt a great deal of responsibility towards the environment, a majority identified financial considerations as the main barrier to adopting more environmentally sound practices.

"For too long we have managed Canada's economic health, the social well-being of Canadians and the health of our natural environment as though they are separate issues," says David Brackett, President of WHC. "Society as a whole is beginning to make these connections and understand the need to balance the costs and opportunities of effective environmental management."

Support for the survey comes from Agriculture and Agri-Food Canada's Advancing Canadian Agriculture and Agri-Food (ACAAF) Program, a funding initiative that encourages innovative solutions to current and emerging issues in the agriculture and agri-food industry. Survey results are available in English and French at www.whc.org.

For over 20 years, WHC has been promoting and participating in stewardship programs with public, private and voluntary sector partners across Canada. These programs have proven themselves to be effective tools for conserving, restoring and enhancing biodiversity. ...Without habitat there is no wildlife - it's that simple!

OTTAWA - With less than three weeks to go before Ministers from various countries meet in Geneva to attempt to finalize a trade deal on agriculture at the World Trade Organization, a poll indicates that 85% of Canadians agree the federal government must support the supply management approach to dairy, poultry and egg farming.

The Léger Marketing telephone poll results also point to reasons why so many Canadians want negotiators to support the current approach:

<< - 98% feel it is important that Canadians have access to a stable supply of made-in-Canada food;

- 95% of respondents agree that family farms are an important part of the economy for rural communities; and

- 83% agree that supply management is a better approach to ensuring a decent living for farmers than taxpayer-funded subsidies. >>

"These very strong results clearly show the kind of agriculture Canadians want in this country," said David Fuller, Chairman of Chicken Farmers of Canada. "Consumers from coast to coast want made-in-Canada food and a decent living for our farmers, without the need for taxpayer funded subsidies. That's exactly what supply management provides in the dairy, poultry and egg sectors."

Canada's supply management system matches production to Canadian demand, and allows farmers to receive a fair price from the marketplace, without relying on taxpayer subsidies. Supply management also eliminates major fluctuations in prices at the farm, processing or distribution level and ensures an efficient and secure food supply.

Jacques Laforge, President of Dairy Farmers of Canada urged Canada's trade representatives to pay attention to the poll results when they approach the negotiating table. "These results prove that the major political parties have it right when they express their support for supply management, during elections and on other occasions. What Canadians are saying in this poll is 'hold fast to those convictions in Geneva'. Supply management works for our rural communities, it works for our dairy, poultry and egg farmers, and it works for consumers."

Canada's dairy, poultry and egg industries generate about $7 billion in farm cash receipts, sustain more than $39 billion of economic activity and employ hundreds of thousands of Canadians throughout the country.

Crop prices drop sharply

Prices paid to Canadian farmers for a number of crops continued to be under pressure due to high North American production levels in 2005 and large world supplies.

In addition, the significant rise in the value of the Canadian dollar against the American greenback lowered returns on Canadian agricultural exports that sell in US dollars.

In December 2005, producers received prices for crops that were 15% below levels of a year earlier, according to Statistics Canada's Farm Product Price Index (FPPI). This continued the downward trend in year-over-year price changes that started in the summer of 2003.

Near-record grain and oilseed production in both Canada and the United States in 2005 added to already large supplies. In addition, growing conditions in many parts of Canada were detrimental to the quality of some crops.

The price index for total crops in 2005 was at its lowest level since the early 1990s. As a result, farmers approached the federal government to seek special assistance for the crops sector.

On the Prairies, production of canola, used to make margarine and cooking oils, jumped 26% to 9.5 million tonnes, the result of a record yield. Flaxseed production nearly doubled.

In Eastern Canada, favourable crop conditions resulted in record corn and soybean production.

Beef markets recover after the US border reopens to Canadian cattle exports

Canadian exports of live cattle and calves under 30 months of age resumed to the United States on July 18, 2005. Breeding cattle, cull cattle and meat from older animals were still not permitted to enter the US market.

The resiliency of the North American beef cattle market became apparent as exports of live cattle neared pre-BSE levels by October 2005. This rebound was significant, especially in the context of the no-trade policy for breeding or cull animals.

Partially offsetting the increase in live cattle exports was a drop in beef meat exports during the second half of 2005. Part of this decline can be attributed to the three-week labour strike at a packing plant in Alberta in late October and early November.

By the end of the year, cattle markets began to recover and prices for livestock and animal products were 5% above levels of a year earlier.

Average 2005 slaughter prices for cattle rose 8%, while the average price for feeder animals increased 32% from 2004.

Huge trade surplus in agricultural products

Canadians export about half of the food they produce and import about half the food they eat. This makes Canada one of the world's most agriculturally trade dependent nations.

For some farm enterprises, such as cattle, hogs and greenhouse vegetables, trade with the United States and other countries has brought opportunities to expand into large new markets. But a trade "shock" can be devastating, as was demonstrated when the Canadian border was closed to exports of live cattle and beef products in the spring of 2003 due to BSE.

In 2005, Canada exported $30.2 billion of agricultural and fish products, down 1.7% from the previous year and 0.9% above the previous five year average.

At the same time, the nation imported $22.0 billion of agricultural and fish products, up 3.1% from 2004 and 6.1% above the previous five year average.

This gave the country a trade surplus in agricultural and fish products of about $8.2 billion.

About 38% of Canada's exports consisted of meat, fish, and live animals; 28% were grains and oilseeds and their products; and the remaining 34% were alcoholic beverages and other food, feed, beverages and tobacco.

Exports of live animals increased nearly 77% from 2004 levels as a result of the reopening of the US border. Wheat exports dropped 23% mainly due to lower demands by China.

In terms of imports, about 29% consisted of fruits and vegetables; an additional 29% were beverages, cocoa, coffee, tea and other prepared foods; 18% were fish, meat and live animals; and the remaining 24% were mainly cereal products, sugar, fodder and feed.

Food processing industry remains strong

Canada's food processing industry held steady last year. Shipments of Canadian manufactured food products totalled $68 billion in 2005, down only a marginal 0.3% from the previous year.

Shipments of beverages and tobacco products amounted to an additional $12 billion, up 0.5%. An increase in beverages more than offset a decline in tobacco.

Food manufacturers used 84% of their capacity in the final quarter of 2004, the highest level over the past decade. Last year, capacity utilization in the sector declined slightly, but was still strong at around 82%.

Crop producers continued to contend with low commodity prices as their revenue tumbled 8.0% to $3.0 billion. This level was 11.3% below the previous five-year average between 2001 and 2005. Abundant world grain supplies and a strong Canadian dollar continue to depress prices.

At the same time, livestock receipts edged down 0.1% to $4.5 billion, with a decline in hog receipts offsetting gains in the cattle and calf sector. This level was at par with the previous five-year average, a period which included the impact of the bovine spongiform encephalopathy (BSE) crises that closed the border to the United States.

Farmers received $1.6 billion in program payments during the first quarter, down 2.6% from the same three months last year. However, the amount disbursed to farmers through various programs was $413 million above the 2001 to 2005 year average.

Including these payments, total farm revenue for January to March reached $9.1 billion, down 3.3%. Overall, total receipts for the first quarter were 0.3% above the previous five-year average.

Provincially, farm cash revenue declined in Ontario and Quebec, mainly the result of lower hog receipts, and in Saskatchewan and Manitoba, where grain and oilseed were responsible.

The largest increase in total receipts (+14.7%) occurred in Prince Edward Island as potato prices rebounded.

Farm cash receipts provide a measure of gross revenue for farm businesses. They do not account for expenses incurred by farmers. Cash receipts can vary widely from farm to farm because of several factors, including commodities, price and weather. For the most recent information about net farm income in 2005, consult the preceding release in today's Daily.

Crop receipts fall to lowest level since 1993

Abundant world supplies and the appreciation of the Canadian dollar continued to plague grain and oilseed prices.

Revenues from wheat (excluding durum) dropped 17.1% to $344 million, the result of lower deliveries and Canadian Wheat Board (CWB) payments. Prices rose 4.9% from the 12-year low received last year. The increase in price was mainly due to an improvement in the quality of the 2005 crop.

Barley receipts fell 33.8% to $88 million due to a combination of lower deliveries, prices and CWB payments. Barley production dropped 5.3% last year as producers planted fewer acres.

Producers deferred much less revenue from the 2005 harvest into 2006 due to historical low grain and oilseed prices and increased input costs. As a result, liquidation of deferments fell around 40% in the first quarter of 2006.

On the other hand, higher canola deliveries lessened the decline in overall crop receipts. Record canola production, it was up 25.0%, and record on-farm stocks at the beginning of this crop year supported a 48.9% jump in deliveries in the first quarter of 2006. Revenue from canola rose 38.3% despite a 7.1% drop in prices. Canola receipts hit $571 million, almost 30% higher than the previous five-year average.

Livestock receipts down slightly despite improvements in cattle, calf revenue

Livestock receipts slipped in the first quarter of 2006 despite improvements in revenues from cattle and calves. Cattle and calf receipts rose 20.9% on the strength of a 12.4% gain in marketings and a 7.5% rise in prices. Overall livestock receipts were constrained by a decline in hog revenues.

The cattle sector continues to regain some of the ground lost during the 26 months of BSE-related trade restrictions. While revenues from the export of live cattle and calves hit $398 million in the first quarter of 2006, they still remained marginally below the same period in 2003, the last full quarter of trade prior to the trade embargo.

Despite the year-over-year improvement in cattle and calf receipts, prices continue to languish below historic averages. The average price for cattle sold for slaughter in Canada through the first three months of 2006 was 16.9% below the five-year average and 10.0% below the equivalent 10-year average.

Revenues from slaughter cattle, representing 56.9% of total cattle and calf receipts, declined 13.6%. Both marketings (-10.7%) and price (-3.2%) were below levels of a year ago. In contrast, the price for feeder cattle rose 15.5%, causing revenues from inter-provincial trade to rise 14.8%.

Cash receipts for hog producers declined 23.2%, as prices tumbled 20.7% in the first quarter from the eight-year high posted last year. Hog receipts were also hit by a 3.1% decline in marketings.

Hog slaughter prices declined in each successive month from September 2005 through February 2006 before posting a marginal increase in March 2006. The downward pressure on prices has come from large North American supplies and a stronger Canadian dollar.

On the supply-managed side, receipts from dairy products, eggs and turkeys all rose, while revenues from chickens declined. Receipts from chickens were 8.3% lower as prices declined 9.9% in the first quarter. Supply-managed commodities accounted for about 40% of total livestock receipts.

Program payments decline from record levels

First-quarter program payments fell 2.6% from the 2005 record level of $1.6 billion, despite strong Canadian Agricultural Income Stabilization (CAIS) payments and the introduction of the new national Grains and Oilseed Payment Program (GOPP).

The GOPP was introduced on February 6, 2006 to provide direct assistance to producers of grains, oilseeds and special crops. More than half of the fund, over $400 million, was distributed to farmers at the end of the first quarter.

The CAIS program delivered $500 million in the first quarter, down $70 million from the same period in 2005. The CAIS program was designed to responds to the needs of producers who experience income loss during times of severe crises (such as BSE).

Crop insurance payments declined 30.6% to $263 million. Withdrawals from the government portion of the Net Income Stabilization Account amounted to $276 million, down 13.5% from the same quarter in 2005, as the program continued to wind down.

Provincial farm cash receipts
	January to March 2005	January to March 2006p	January–March 2005 to January–March 2006
	$ millions		% change
Canada	9,380	9,072	-3.3
Newfoundland and Labrador	20	21	5.0
Prince Edward Island	95	109	14.7
Nova Scotia	128	130	1.6
New Brunswick	105	112	6.7
Quebec	1,391	1,335	-4.0
Ontario	2,153	1,983	-7.9
Manitoba	1,065	1,034	-2.9
Saskatchewan	1,864	1,761	-5.5
Alberta	2,064	2,084	1.0
British Columbia	496	503	1.4
p preliminary Note: Figures may not add to totals because of rounding

Note to readers

Statistics Canada does not forecast farm cash receipts. These data are based on survey and administrative data from a wide variety of sources.

Farm cash receipts measures the gross revenue of farm businesses in current dollars. They include sales of crops and livestock products (except sales between farms in the same province) and program payments. Receipts are recorded when the money is paid to farmers before any expenses are paid.

Deferments represent sales from grains and oilseeds delivered by western producers, for which payments were deferred until the next year. Because these receipts are based on physical deliveries, any deferred payments are deducted from the farm cash receipts of the current calendar year and included when they are liquidated (see "liquidations of deferments" in the farm cash receipts table).

Program payments include payments tied to current agricultural production and paid directly to farmers. Examples of these payments come under the Net Income Stabilization Account, the Crop Insurance Act and provincial stabilization programs. The program payments series does not attempt to cover all payments made to farmers nor does it represent total government expenditure under all assistance programs.

Realized net income for Canadian farmers fell in 2005 to its lowest level since 2003, following two years of drought and more than two years of battling trade restrictions because of bovine spongiform encephalopathy (BSE).

Realized net income (the difference between a farmer's cash receipts and operating expenses minus depreciation, plus income in kind) declined 7.7% to $2.1 billion. This figure was 8.0% below the previous five-year average (2000 to 2004).


Newfoundland and Labrador, Prince Edward Island, Ontario and Saskatchewan recorded gains in realized net income in 2005. In Alberta, realized net income dropped to half of the previous year's level, and in Manitoba it declined by almost 40%.

Total farm cash revenue from livestock and crop receipts and program payments rose 1.2% in 2005. Higher revenues from cattle and calves more than offset a decline in revenues from crops and hogs. Crop producers saw their receipts fall 6.9%, largely because of depressed prices.

Meanwhile, farm operating expenses rose 1.7% in the wake of higher costs of machinery fuel, fertilizer and livestock purchases.

Realized net income can vary widely from one farm to another because of factors such as commodities produced, prices and weather. It does not take into account the value of on-farm inventory changes. It is a measure of farm business income, not farm household income.

Higher revenues for cattle push up market cash receipts
Market cash receipts, or revenues from the sale of crops and livestock, increased 0.9% to $32.0 billion last year. The main contributor was higher revenue for cattle, particularly during the last half of the year.

Cattle producers led the growth as their receipts surged 26.6% to $6.4 billion. This was still 1.7% below the previous five-year average. This surge was due, in large part, to the resumption on July 18, 2005 of trade in live cattle, under 30 months of age, with the United States.

Receipts from international trade in live cattle and calves went from zero in 2004 to $657 million during the last half of 2005. This represented 3.6% of total livestock revenues and about 10% of total cattle and calf receipts. The reopening of the border also helped bolster prices for cattle and calves marketed domestically. Average slaughter prices for cattle rose 8.4%, while the average price of feeder animals rose 32.5% from 2004.

Revenues from hogs fell 8.1% from 2004 to $3.9 billion, driven by lower prices and a decrease in marketings for domestic slaughter and international exports. Despite the decline, hog receipts were still 8.4% above the previous five-year average.

Supply-managed commodities accounted for almost 40% of total livestock revenue in 2005. Receipts for chicken and turkey grew, while revenues from eggs declined. Receipts for milk and cream rose 5.3% on the strength of a 6.6% increase in price.

After rebounding in 2004, crop receipts fell 6.9% in 2005. They were 2.2% below the previous five-year average. Abundant world grain supplies, including lower quality domestic grains from the 2004 harvest as well as a strong Canadian dollar, depressed prices, in some cases to near-record lows.

Receipts from wheat (excluding durum) fell 22.8% to $1.9 billion, as prices plunged 22.9% below 2004 levels and 28.4% below the previous five-year average. Farmers received $1.9 billion for canola, down 13.7% from 2004. Deliveries rose 14.2% in 2005, while prices fell 24.4%.

In total, farmers received $37.0 billion from all three sources (livestock and crop receipts and program payments), up 1.2% from the previous mark set in 2004.

However, program payments rose 3.1% to a record $5.0 billion, representing 13.6% of total gross revenue. It was the third consecutive year in which program payments hit record highs, and the 2005 level was 28.0% above the previous five-year average.

Farmers received large payments through the Canadian Agricultural Income Stabilization program and the Farm Income Payment program. These offset lower withdrawals from the Net Income Stabilization Account and reduced provincial stabilization payments. Federal and provincial programs have responded to difficulties in the cattle, grains and oilseeds sectors with payments to affected producers.

Operating expenses: Soaring energy prices had big impact
Farm operating expenses rose 1.7% nationally and were 6.3% above the previous five-year average. Soaring energy prices were the biggest factor. Most other expense items also rose, but a large decrease in feed costs dampened the increase.

Expenses increased in all provinces except in Quebec, where they fell 2.0%, and Manitoba, where they edged down 0.7%. Elsewhere, the increases varied from 0.8% in Newfoundland and Labrador to 5.3% in British Columbia.

Almost two-thirds of the increase in gross operating expenses came from record high fuel costs, which were 20.2% above the levels in 2004.

Cattle and calf prices rose following the reopening of the US border to trade in live cattle, resulting in a 25.9% gain in the purchase costs of livestock.

Cash wages continued their long-term increase, reaching $3.9 billion in 2005, up 2.6% annually compared with a 1.7% increase in 2004.

Higher prices also led to a 3.1% increase in fertilizer expenses.

With increasing debt load and stabilizing interest rates, interest expenses climbed 4.2%, the first increase since 2000.

In contrast, lower grain and oilseed prices resulted in reduced feed prices. Feed costs fell 11.6% to $4.2 billion, the lowest level since 2000.

Lower farm inventories reduce total net income
Following two years of increases, total net income fell 35.8% to $2.6 billion in 2005. Total net income adjusts realized net income for changes in farmer-owned inventories of crops and livestock.

Despite an increase of on-farm grain and oilseed inventories to well above 10-year averages, lower grain and oilseed prices in 2005 reduced the increase in the value of crop inventories compared to 2004.

A small drop in cattle and calf inventories also moderated the rise in values.

Net farm income
	Canada	N.L.	P.E.I.	N.S.	N.B.	Que.	Ont.	Man.	Sask.	Alta.	B.C.
	$ millions
2004r
+ Total farm cash receipts including payments	36,554	86	348	453	417	6,311	8,610	3,903	6,005	8,008	2,415
- Total operating expenses after rebates	29,876	83	323	382	369	5,049	7,371	3,140	5,014	6,194	1,952
= Net cash income	6,678	3	25	71	48	1,262	1,239	763	990	1,814	463
+ Income-in-kind	134	0	1	2	2	43	41	9	13	16	7
- Depreciation	4,501	6	38	52	44	583	1,080	404	919	1,115	261
= Realized net income	2,311	-2	-12	21	7	721	200	368	83	715	210
+ Value of inventory change	1,753	1	7	-1	-9	127	322	-57	841	546	-24
= Total net income	4,063	-1	-6	20	-2	849	522	311	925	1,261	185
2005p
+ Total farm cash receipts including payments	36,992	91	364	453	427	6,208	9,031	3,743	6,355	7,908	2,411
- Total operating expenses after rebates	30,389	83	333	387	378	4,949	7,492	3,117	5,141	6,454	2,055
= Net cash income	6,603	8	32	66	49	1,260	1,539	626	1,215	1,453	356
+ Income-in-kind	153	1	1	2	2	39	49	12	17	24	7
- Depreciation	4,622	6	40	54	46	620	1,116	411	916	1,148	265
= Realized net income	2,134	2	-7	14	5	678	472	227	316	329	98
+ Value of inventory change	476	0	-30	-2	10	-35	9	-215	489	293	-43
= Total net income	2,610	2	-37	13	15	643	481	12	804	623	55
r revised p preliminary Note: Figures may not add to totals because of rounding.

Note to readers

Net cash income measures farm business cash flow (farm cash receipts minus operating expenses) generated from the production of agricultural goods. Net cash income represents the amount of money available for debt repayment, investment or withdrawal by the owner.

Realized net income measures the financial flows, both cash and non-cash, attributable to the farm businesses, similar to an income statement (net cash income minus depreciation plus income in kind). Realized net income represents the net income from transactions in a given year in that it includes the sale of commodities regardless of the year they were produced.

Total net income measures the financial flows and stock changes of farm businesses (net cash income minus depreciation plus income in kind and value of inventory change). Total net income values agriculture economic production during the year that the agricultural goods were produced. It represents the return to owner's equity, unpaid labour, management and risk.

Farm cash receipts measures the gross revenue of farm businesses in current dollars. They include sales of crops and livestock products (except sales between farms in the same province) and program payments. Receipts are recorded when the money is paid to farmers before any expenses are paid.

Farm operating expenses represent business costs incurred by farm businesses for goods and services used in the production of agricultural commodities. Expenses are recorded when the money is disbursed by the farmer.