Farm households earning more – but is it coming from the farm?

Changes in farm structure and rural opportunities have boosted the income of Canadians who live on farms

Canadian farm family incomes have pulled ahead of other Canadian households by a large margin, but it may have more to do with off-farm revenue sources than it does higher returns from farming. The median income reported by farm households is now 17.3 per cent more than the median recorded by non-farm workers, which is a reversal of the data 50 years ago, when farm households earned 51.2 per cent less.

Why it matters: The increase in farm household incomes is a stabilizing force for farm businesses and rural communities, but it complicates policy.

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The Statistics Canada numbers on farm household income are significant, but need to be understood related to many statistical, historical and greater societal changes, says Alfons Weersink, a professor in the Department of Food, Agricultural and Resource Economics (FARE), at the University of Guelph.

First, the data is a median — the value that separates the higher half from the lower half of the data, not an average. That means there are actually likely fewer people at the median number than at the higher and lower ends of the farm household income continuum. Still, the number is a good comparison to the rest of the population.

As well, it is challenging to figure out how much of farm household income is actually connected to farms.

The factors supporting increased farm family incomes are multifaceted, including:

  • A large change in the number of farm household spouses who earn off-farm income.
  • Technological change, which has driven the ability of individual farmers to create more value per worker.
  • A greater number of farmers earn off-farm income, often by choice.
  • There is much greater heterogeneity among farm households — there are more large and more small farms and fewer in the middle.
  • Farm policy that encourages value adding by farms and broader influences like ethanol policy that now provides a local market for 30 to 40 per cent of the corn produced in Ontario.
  • A long-term emphasis on trade, which has grown the amount of production per farm.

Statistics Canada has linked household income to the agriculture census data in some form since 1971, but it warns that comparisons among some of those years was not possible due to differences in how it is measured. A 1971 comparison to 2016, however, was effective, it said in releasing the data.

Matthew Shumsky, an agricultural analyst for Statistics Canada, said the long-term changes in income represent an evolution of Canadian farm populations.

“Canadian farmers have continually taken advantage of technological advances to more efficiently deliver a wider variety of agricultural products that consumers want,” he said. “There has also been a diversification in the income streams for the farm population.”

photo: Illustration: Statistics Canada

Weersink said farm incomes are historically volatile, which needs to be factored into the equation.

The early 1970s were characterized by hard times for farmers, while a healthier period in the mid-to-late 1970s followed. The 2016 census followed a time of healthy income for farmers, especially in the crops sector from 2010 to 2014.

As well, farmers’ net worth tends to be higher, projected by AAFC to average around $3.18 million in 2018. The median net worth of Canadian families is about 10 per cent of that. While not income per se, net worth is a measure of wealth.

How big a deal is off-farm income?

The reality could be that off-farm income is the largest driver of the farm household income figure.

The annual agricultural outlook prepared by Agriculture and Agri-Food Canada projected last spring that the median farm family income for 2018 would be just over $147,000, but only $33,000 of that would be net operating income.

Net farm income as a percentage of farm household income had been decreasing in other censuses in the 2000s, such as both of 2001 and 2006 censuses, down to about 20 per cent of Statistics Canada farm household income.

Statistics Canada allows anyone with the intent to sell an agriculture product to count themselves as a farm, different than the farm income thresholds that have to be met for provincial programs, for example.

Statistics Canada now counts 592,975 people as living on farms, but that includes family members of all ages. Canada put the number of farmers at 270,715 on 194,000 farms in the 2016 census, also believed to be higher than farms producing much of their income from agriculture production. The average number of people in a farm household declined by 35.5 per cent from 1971 to 2016 to 2.8 people.

“The number of farm operations that sell less than $10,000 of goods is pretty significant,” said Weersink.

Statistics Canada says that a higher percentage of farm households are living in urban areas than 50 years ago at 16.1 per cent by 2016 from 7.9 per cent in 1971. Much of that increase could be the expansion of city boundaries, but it also shows the influences of cities.

The higher income number for farms would likely be influenced by the professionals who have moved from the cities to commutable farm properties nearby.

The movement of women into the workforce has also been a defining social trend since 1971.

“The spouse has a pretty high probability of working off the farm,” said Weersink, but that trend has also been seen in general society too, so that doesn’t fully explain the change from lower income than the median in 1971 to above median income on farms by 2016.

Weersink published research last year in the Canadian Journal of Agriculture Economics that showed the long-term hollowing out of middle-sized farms resulting in greater variation among Canadian farms.

In the early 1970s farms were mostly the same — mixed farms run by single families where most of the income came from the farm. Today farms have become increasingly large — and small. In the process they have also become highly diverse.

At one time farmers that had off-farm income were thought to have been forced to do so by economic necessity — and that sometimes remains true — but there is also a group of people who choose to have a career off the farm and to also be involved in agriculture at the production level on a part-time basis.

The productivity factor

Increased productivity in agriculture production has driven many of the trends that have pushed up farm household income. A farmer can keep the farm size that once required full-time work and now do that work and work off the farm. Others have been able to increase farm size to a place where they, along with family members and employees can have a significant income. And farm productivity has allowed spouses and children more flexibility to contribute to household income through earnings off the farm.

Policy implications

The fact that most farm household income is now above that of general workers in the Canadian economy will have implications for agriculture economic policy, said Weersink. It is challenging for policy makers to create something that will fit an average farm — because an average farm doesn’t exist. Smaller farms likely have off-farm income, which helps manage farm risk, and larger farms have a better handle on risk management and the scale to enact risk management schemes. That has led to more farm economic development policy based on competitiveness versus shoring up income.

Rural Canada has become increasingly complex. Commuting to nearby larger population centres is commonplace. That’s reflected in farm households and their increased income.

About the author

Editor

John Greig has spent his career in agriculture journalism and communications. He lives on a farm near Ailsa Craig, Ontario. Contact John at [email protected] or follow him on Twitter @jgreig

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