Canada Markets

A Look at 2016 Farm Financial Health

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Wednesday's Statistics Canada data release shows Canadian farm profitability measures improving in 2016 for the second straight year, with the return on assets (blue line) reported at 2.7% and return on equity (brown line) reported at 2.4%. (DTN graphic by Nick Scalise)

Statistics Canada released its Balance sheet of the agriculture sector, Dec. 31 report on Wednesday. Canada's farm equity is shown to have exceeded $500 billion for the first time at $500.337 billion, having grown every year since 1986. The rate of year-over-year growth, at 4.5%, is the lowest seen since 2009. By selected province, the lowest annual growth is seen in Ontario at 3.5%, to $136.7 billion, with Manitoba's equity growing by 4.4%, to $37.3 billion. Saskatchewan grew by 3.7%, to $92.2 billion, and Alberta by 6.8% to $141.5 billion. Statistics Canada reports only two provinces -- Newfoundland and New Brunswick -- showing a year-over-year decline in equity.

Of the total value of assets held by Canadian farmers, the value of farm land accounts for an increasing share of total assets. In 2016, this number was 68.2% of the total $591 billion in Canadian farm assets. In year 2000, farmland accounted for only 49.1% of total assets. As of Dec. 31, the value of grain inventories was at a two-year low and higher than the five-year average. On a percentage basis, grain inventories accounted for just 3% of total farm assets, the lowest percentage in 10 years.

Total debt in the farm sector grew by 7.5%, to a record $90.8 billion, having grown each year since 1993. This rate of growth is a three-year high for the farm sector. Given a look at selected provinces, Ontario holds the highest level of debt at close to $24 billion, growing by 5.2% year over year, while Alberta's farm debt grew by 4.8%, to $20.6 billion. Manitoba's farm debt grew by 9.4%, to $8.6 billion, while Saskatchewan farm debt grew by 12.9% to roughly $14 billion.

The debt/asset ratio is reported at a three-year high of 15.4% across the country. For major grain producing provinces, this ranges from 12.7% in Alberta to a high of 18.7% in Manitoba, which points to a high degree of financial health across the sector given Statistics Canada's analysis.

Farm Management Canada ran an hour-long Agriwebinar today titled Balancing Business and Financial Risk and hosted by Michael Langemeier, a Purdue University professor. This may be of interest and should be available soon in the Past Webinars section at agriwebinar.com.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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