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If you drive through some parts of rural Canada, such as the Prairies or southwestern Ontario, you might think every square metre is under cultivation and that everyone lives and works on a farm.

A century ago, most Canadians did live in rural areas and a large portion worked in agriculture. Compared with 50 years ago, agriculture today uses roughly the same amount of land but far less labour to produce more than enough to feed our population, which has more than doubled.

Don’t be fooled by the huge fields of crops along our rural highways. Just 5% of Canada’s land area is used for agriculture. That’s still a large area—about 46 million hectares—but it’s just 3% of the world’s agricultural land.

As in most industrialized countries, farming here requires relatively few people. About 727,000 Canadians lived on farms in 2001, comprising 12% of Canada’s rural population and just 2% of the overall population.

Who’s working the farm?

Farming has become a way of life for just a few. Even in the most agriculture intensive areas, only a minority work in farming. Around Maple Creek, Saskatchewan, 45% of the labour force works in agriculture—the highest proportion in any census division; in southwestern Ontario’s Huron County, the proportion is just over 15%.

In 2006, over 346,000 Canadians worked in agriculture, or 2% of the labour force. The next stage in the food production process—the food and beverage processing industry—employs another 270,000. Together, agriculture and food and beverage processing account for 3.4% of our economic output, as measured by gross domestic product.

Farming is not all fields of green or gold grain swaying in the breeze. It’s a tough, perennially difficult business: prices for most commodities have been declining for decades, and recent years have been particularly hard for certain agricultural commodities.

Pretty landscape, tough business

One measure of the prices farmers receive is Statistics Canada’s Farm Product Price Index, whose base year is 1997. In 2006, the price index of all farm products was 96.1, down 9.6 percentage points from the most recent high in 2002. Prices in 2006 for some commodities, such as grains, oilseeds, hogs and poultry were well below their 1997 price levels. In contrast, prices for potatoes, other vegetables and dairy products in 2006 were well above their 1997 price levels.

For cattle farmers, market conditions have improved since the U.S. border reopened in mid-2005; for hog farmers, times are not so good. Farm cash receipts for cattle were 2% higher than in 2005, and producers shipped double the number of cattle. Although hog producers exported record numbers of hogs, they earned 14% less than in 2005 because of lower prices, down 10.8 percentage points.

Grain prices have been in decline for much of the last two decades. From 1984 to 2006, grain prices dropped more than 33%, despite brief surges in the late 1980s, the mid-1990s and early 2000s. However, higher prices and sales pushed up farm cash receipts for wheat by 16% in 2006.

Net farm income is another indication of economic conditions for farmers. Statistics Canada gathers data on ‘realized net income’ for Canadian farms, a measure of the difference between farmers’ cash receipts and operating expenses, minus depreciation, and plus income-in-kind.

The 2005 net farm income data show the effects of two years of drought on the Prairies and the closing of the U.S. border to shipments of live Canadian cattle because of the bovine spongiform encephalopathy (BSE) scare. Canadian farmers’ realized net income was down 14% to $1.9 billion from 2004 and at its lowest point since 2003, before the drought and BSE crisis began. Longer term, net farm income was 16% lower than the average of the years 2000 to 2004.

Agricultural program payments help to moderate the effect of market revenue fluctuations on farmers’ incomes. In 2005, payments hit a record high of $4.9 billion, and represented 13% of total gross revenue.

Don’t blame it all on BSE

It’s not quite fair to blame 2005’s poor financial showing completely on cattle, since shipments of live animals to the United States resumed at mid-year. Sales of exported live cattle and calves rebounded from zero in the first half of 2005 to $624 million, or about 10% of cattle and calf receipts. Cattle producers’ overall receipts, including domestic sales, were up 25% from 2004.

Crops and hogs also contributed to the 2005 decline. Crop receipts were down 7% from 2004; hog receipts declined 8%. The reasons for fluctuations in receipts are usually a complex combination of factors, such as price changes, crop yields, and decisions by farmers to rush products to market or to hold them back.

Grain prices are a major factor in crop receipts. World grain supplies were ample in 2005, and so some prices were at near record lows. Cash receipts for wheat, excluding durum wheat, tumbled 21% from 2004, and were 28% below the 2000 to 2004 average. Prices for canola were down 24% from 2004, but increased deliveries by Canadian farmers moderated the dip in receipts to 14%.

Those swaying fields of gold might suggest a good harvest, but a host of factors that cannot be seen from the highway—prices, the size of grain stocks in storage from previous harvests, input costs, currency fluctuations, trade restrictions and shifting demand—all influence whether a good harvest translates into a good financial year for farmers.