Net farm income, a broad measure of profitability in the agricultural economy, is forecast to drop 0.7 per cent to $153.4 billion (C$210.1 billion) in 2026 from the year before, USDA said. When adjusted for inflation, net farm income is projected to decrease by $4.1 billion or 2.6 per cent.

Without government payments, net farm income this year would fall nearly 12 per cent to $109.1 billion, according to agency data.

“Government payments are doing a lot of the work in supporting crop producers,” said Wesley Davis, a partner at Meridian Agribusiness Advisors, an agricultural economics consultancy in New York City.

Increasing dependence on gov. support

But farmers, economists and lawmakers warn that even more government support may be needed to offset the impact of low crop prices, a global grain glut, rising operational costs and lost export sales due to Trump-era trade and economic policy changes.

Many farmers are increasingly dependent on federal support to pay their bills — while also taking on record levels of debt — even as government payments near record levels, economists said.

USDA forecast that producers will receive $30.5 billion in direct payment support in 2025 and $44.3 billion in 2026, excluding additional payouts from federal crop insurance indemnities.

Such levels have not been seen since 2020 and 2021 amid COVID-19 pandemic upheaval and trade disruptions during President Donald Trump’s first term.

Farmers suffering losses

On Thursday, USDA said the higher support figures reflect payments from Farm Bill programs triggered by falling crop prices, along with continued high levels of supplemental and disaster assistance.

The data, which is published three times a year, was not released in December due to an earlier federal government shutdown and those findings were incorporated into the regular February report. Agricultural economists said that delay has made it harder to assess stress in the sector.

USDA forecast that farmers’ cash receipts – what they get paid for their crops – would rise this year for corn, hold generally steady for soybeans and fall for wheat. Livestock receipts are expected to drop due mainly to lower egg and milk prices, while cattle receipts will continue to increase.

The chair of the U.S. Senate’s agriculture committee said on Tuesday that many farmers were suffering heavy losses, while more than two dozen former USDA officials and industry leaders cautioned lawmakers that U.S. agriculture faced the risk of a “widespread collapse” in part because of the Trump administration’s policies.

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Average income for families operating a single farm in Canada grew by 0.9 per cent to $216,021 in 2023 compared to 2021. However, this was driven by higher off-farm income — namely through investment and pension revenue.

Average net operating income fell by 0.6 per cent.

Farm family income is published every two years, StatCan said.

Highlights of the report include:

• Families operating potato farms saw the largest increase at 25.5 per cent growth since 2021. Poultry and egg farmers came in second with 8.6 per cent growth.
• Families operating pig farms saw the largest decline in income — a 21.9 per cent decline between 2021 and 2023. Greenhouse, nursery and floriculture farm families saw a 17.2 per cent decline in average income.
• Average off-farm income increased by 2.2 per cent to $116,788. Off-farm income accounted for 54.1 per cent of total farm income in 2023.
• Prairie farm families earned the highest average total income in Canada, led by Saskatchewan at $264,991 in 2023, Manitoba ($247,707) and Alberta ($242,130)

Farm average net operating income jumped in 2023 by 17 per cent over 2022, according to Agriculture Agri-Food Canada data. The net operating income tracks producers’ revenue minus cash expenses at the farm level. High livestock receipts, driven by strong cattle markets, bolstered the total. Crop prices were also strong for most of the year.

Conditions were less favourable for hog farmers.

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No one does really, but farmers seem to have a particular disdain for sending money to Ottawa.

I think there are a few reasons for this.

One is cash basis income tax treatment which means farmers can often defer paying income tax. Farmers can benefit from deferring income tax, although I would argue it’s more of a necessity than a benefit.

The only alternative would be taxing the farmer on his or her production inventory before it’s sold, estimating production and a selling price.

Other business owners and professionals are taxed on their receivables, but for farmers, the inventory is often not yet contracted or sold.

There are two main strategies to defer income taxes. One is to pre-buy next year’s input expenses; the other is to defer grain ticket settlements to the next fiscal year. In the 2017 budget the Liberal government considered changes to the Canadian grain ticket income tax deferral rules. I responded to the government consultation that grain ticket deferral doesn’t cost government anything directly and I argued taking it away would only further increase farm support payments.

Fortunately, the rules remained unchanged.

There are two ways to record income taxes on accrual financial statements. One is the taxes payable method which is just as it sounds: simply report income taxes owing as a payable.

The other method is the future income taxes method. This method recognizes the future taxes owing on your unsold inventory and, in some cases, the difference between accounting net book value and tax net book value of assets such as farm machinery.

I prefer the income taxes payable method for its simplicity. I find the future income taxes method only relevant if operations were to wind down next year — which almost never happens.

Another reason farmers don’t like paying taxes is perceived government waste. Farmers work hard for their profits and like everyone, want to see good return for their tax dollars.

Most of my working career I’ve been a T4 income earning employee. Taxes withheld since my first pay cheque never hit my bank account. If you never see the money, it’s harder to envision it as your own.

Then I started my fractional CFO firm where I source and execute the work, pay the bills and have to send a chunk of profit away in taxes. It’s a different mindset when the money physically hits your bank account and then you have to send a large portion away each quarter.

The same is true for farm business owners who must acquire land and livestock, purchase supplies and inputs and then execute on a farm business plan. Hopefully, weather cooperates and they’re able to squeak out a profit. And then, hopefully, politicians put their taxes paid to good use.

One advantage Canada has over the U.S. is the absence of personal property taxes on farm machinery. (Although significant exemptions exist.) Some states, such as Montana, levy a tax for the value of farm machinery on hand at the end of every year.

Canadian farmers also benefit from a tax-free rollover of farms to the next generation and may it always remain this way. Any introduction of a wealth or estate transfer tax would be as popular as last year’s attempted capital gains tax increase.

So, between start-up years, money-losing years and deferring tax, farmers aren’t used to paying taxes. Many farm accountants tell their clients they should want to pay income taxes, because it means that the farm has been profitable long enough to exhaust the usual tax deferral strategies.

Just remember that farmers will never like it.

Craig Macfie, CPA, PAg, provides fractional CFO services to growing farms and agribusinesses. Find out more at springcfo.com

The post Why do farmers hate paying taxes? appeared first on Country Guide.

“Demand for farmland remained strong in the first half of the year regardless of lower commodity prices,” said FCC chief economist J.P. Gervais in a news release.

“Buyers continued to invest, driven by long-term confidence in the agriculture sector and the limited supply of available land.”

The overall range of sale prices per acre has increased “only modestly,” the farm lender said. Provinces that had seen strong growth in recent years are seeing softening farmland prices while regions that had previously seen more modest growth are seeing solid gains.

“Overall, the market appears to be stabilizing,” FCC said in the news release.

Where and why values are growing

Farmland values gained 10.4 per cent year over year between July 2024 and June 2025.

That compares with 5.5 per cent growth in land values in the first half of 2024 and a 9.3 per cent annual increase that year.

Manitoba led all provinces with 11.2 per cent growth in the first half of 2025, with the Parkland and Westman regions seeing the strongest growth. In the Parkland region, large grain operations are building their land bases, FCC said. Alberta and Saskatchewan saw growth near the national average with 6.6 per cent and 6.0 per cent respectively.

New Brunswick saw the second-highest growth with a 9.4 per cent increase January to June. Strong growth in southern New Brunswick, particularly the dairy farming region, drove the increase. Gains in the other Maritime provinces were more modest with Nova Scotia at 1.0 per cent and Prince Edward Island at 2.3 per cent.

British Columbia and Ontario land values remained flat, and Quebec saw 2.6 per cent growth.

Cash receipts steady

FCC noted that farm cash receipts, interest rates and the overall supply of farmland are key drivers of values.

In the first half of 2025, cattle receipts were up 18.3 per cent on record prices. This pushed total mid-year cash receipts up 3.3 per cent. Grain and oilseed receipts rose slightly in early 2025, though this varied by region.

Grain and oilseed receipts are expected to fall by six per cent in 2025 compared to last year. Increased production, the effects of China’s tariffs on Canadian canola and peas and tariffs between the U.S. and China are expected to weigh on commodity prices.

However, easing interest rates and healthy balance sheets carrying over from the record crop years of 2022 and 2023 should lend support to farmland values.

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Overall receipts between January and June totalled $49.6 billion, up $1.6 billion from the same period last year, Statistics Canada reported on Friday.

Lower crop insurance payments drove a decline in direct payments. Total direct payments dropped by $584.5 million (20 per cent), led by declines in payouts in Saskatchewan and Alberta.

Prices drive livestock receipts surge

Receipts for livestock rose by $2.1 billion to $21.3 billion in the first two quarters — a 10.8 per cent gain. Higher prices for all livestock except poultry drove the surge.

Cattle receipts were up by $1.2 billion (20.3 per cent) despite a 3.1 per cent decline in marketings, on high cattle prices. Hog receipts rose $436.4 million (10.5 per cent) compared to the same period in 2024 due to strong international demand for pork products, StatCan said.

Supply-managed receipts grew 2.7 per cent to $7.7 billion largely due to a $184.8 million increase in dairy receipts. Turkey receipts fell by $39.6 million due to a reduction in national quota.

Crop receipts steady

Crop receipts were relatively similar to last year at $25.9 billion — a 0.3 per cent rise. For most crops, receipts rose but these were offset by reduced receipts for barley and lower liquidations of deferred crop sales in the West, StatCan said.

Soybean receipts rose by $103.2 million and canola receipts gained $76.4 per cent on higher marketings.

Cereal and grain receipts rose on higher durum receipts — up 197.2 million. Wheat, excluding durum, rose by $122.9 million.

“For most grain crops, higher marketings drove the rise in receipts while lower prices moderated gains,” StatCan said.

Barley receipts fell by $110.1 million as prices and marketings declined.

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Others would rather be outside working with cattle or at conferences learning the latest disease management techniques. 

If you’re not in the first category, your banker might know more about your farm financial indicators than you do. 

There are such long lists of financial indicators available it can be hard to know where to start. And once you calculate a financial ratio, how do you know if yours is “good”? 

If you don’t calculate these three financial ratios, your banker will. So, why not start by doing the math at home and taking them along to your next meeting?

Why financial indicators matter

Rising land prices have pulled up many farmers’ net worth statements. 

“There is not an equity issue out in farm country. Most operators are holding land that has appreciated well,” says Craig Macfie, founder of consulting firm Spring CFO (link to www.springcfo.com). Macfie has seen all kinds of farm financial statements through his consulting work, as an accountant, as a past CFO for Monette Farms and through his experience as a farmer in Crystal Springs, Sask.

But lenders care about more than net worth. Lenders want to know if your assets are generating profits, and if you’re able to repay loans. 

In some banks, Macfie says, “the bank credit department is God, and your bank relationship manager is the Pope.” That is, the banker you meet with doesn’t typically have authority to make lending decisions without support from someone in the credit department. 

When you need a loan, Macfie says, “You need the Pope on your side, advocating for you.” Your bank manager can tell the credit department what a strategic farmer you are, but the credit department is still going to want to see the numbers. 

Your financial indicators will have to carry the day. 

The lenders’ perspective

Macfie suggests three key financial indicators can show your farm’s ability to repay loans. 

Roxane Lieverse is an executive vice president and the head of agricultural banking with Rabobank in Canada. When asked which financial indicators are important for lenders, she lists the same three indicators. 

The financial indicators these two professionals see as highly relevant to bankers are:

1. Working capital to expense ratio
2. Debt service coverage ratio
3. Debt to equity ratio

Together, these three indicators show lenders your farm’s recent financial performance and your farm’s ability to repay loans. 

1. Working capital to expense ratio 

What it measures: The working capital to expense ratio measures your farm’s ability to stay in business through the next production season. 

“It shows the actual working capital available for a producer to put in their crop, whatever it is they’re growing or producing,” Lieverse says.

How to calculate it:

First, calculate your working capital:

Working Capital = Current Assets – Current Liabilities

Where current assets equal assets that can be converted to cash within one year (e.g., bank accounts, inventory, prepaid expenses) and current liabilities that must be paid within a year (e.g., accounts payable, operating loans, rent payments, credit card debt, taxes).

Working Capital to Expense Ratio = Working Capital / Annual Operating Expenses

Some financial analysts use these same measures to calculate the Current Ratio, which compares current assets to current liabilities. 

Current Ratio = Current Assets / Current Liabilities

The current ratio can be used to measure short-term viability, but Lieverse and Macfie both find comparing working capital to annual expenses more intuitive. 

A “good” ratio for you depends on your strategy. 

If working capital is equal to annual farm expenses, your ratio is 1:1. “Your farm can finance next year’s crop,” Macfie says.

Many farms’ ratio is less than one. 

“Some farms put all of their working capital into more land and machinery, and that’s how they grow.” These farmers are using cash-on-hand to finance expansion, whether it’s land, machinery or equipment. “That works,” Macfie says, “until it doesn’t.”

If the working capital to expense ratio is too low, the farm will be short on cash, perhaps to the point of financing short-term inputs with expensive retail credit. 

“Once you maximize retail credit, there’s really no options besides refinancing or selling land,” Macfie says.

The safest approach is to keep your working capital to expense ratio well above 1:1. But this plan may not keep your money working hard enough. Maybe some capital could replace depreciated assets or repay high interest loans.

Macfie visualizes this ratio as a teeter-totter, with managers balancing cash on hand against re-investments. “The hard part is that balance.”

What does Macfie advise? “The easy advice is 50 percent,” Macfie says, noting that the ideal situation will always vary from farm to farm according to your strategy and your industry.

2. Debt service coverage ratio (DSCR)

What it measures: “Bankers are concerned that you can repay your debts,” Macfie says. “Why would you loan more money to someone who hasn’t shown recently that they can service debt? If your three- or five-year history doesn’t show you can service more debt, why would I give you more debt?”

The debt service coverage ratio compares your recent annual income to the size of your debt. 

How to calculate it:

DSCR = Income / Debt Service

Where income equals farm revenues (after taxes) minus operating expenses (excluding interest), plus off-farm income. Debt service equals payments on short-term and long-term loans, including principal and interest.

What is a good ratio? If your debt service coverage ratio is 1:1 or higher, you have enough income to pay your debt. A higher DSCR indicates higher profitability relative to debt.

Lieverse would like to see a ratio a little higher than 1:1. “Ideally above 1.25, but it’s very heavily dependent on the industry.” 

Rising interest rates will increase your debt costs, decreasing your DSCR. You could raise your DSCR by restructuring or paying down debt. 

A manager focused strictly on DSCR might turn down growth opportunities that require debt. The ideal ratio is the number that fits your strategy.

3. Debt to equity ratio (DER)

What it measures: The first two indicators on this list are more important to banks, says Lieverse, as they’re more relevant to day-to-day operations. The DER shows your long-term viability. “If there was a profitability concern, long-term, how could the producer sustain themselves?”  

How to calculate it:

DER = Total Liabilities / Total Shareholders Equity

Where total liabilities equals all short- and long-term debt and total shareholders equity equals total assets minus total liabilities.

Corporate balance sheets usually show long-term assets such as land and buildings at purchase price (book value). Updating asset values to current fair market prices makes the results more realistic (and probably more comforting). 

What is a good ratio? A low DER indicates a farm with flexibility to borrow money if opportunities arise. A farm with a high DER may have taken on debt to buy more land or may be in a financially vulnerable position.

While long-term customers may have some leeway, Macfie says, “Banks don’t care if you’re sitting on a bunch of land equity if the farm hasn’t been profitable in a few years.” 

You could raise your DER by selling land or equipment to repay loans. But unless downsizing is part of a long-term strategy, it may not be the ideal solution for you or your lender.

Take action to control financial indicators

Many aspects of farm financials are outside your control. If you find yourself with less-then-perfect ratios, here are four steps to take:

1. Develop good working relationships: “You can’t control the weather, but you can control having a good relationship with your banker and your accountant,” Macfie says. 
2. Timely financial statements: Your financial indicators may not be great, but they can still be timely. “You can control getting your bookkeeping to the accountant on time, so they can get it to the banker on time,” Macfie says.
3. Check your corporate year end: Ratios change depending on where you are in your annual production cycle. For example, if you’re a grain farmer with a July 31 year end, “the bank is testing your balance sheet at the worst time of year.” Your Working Capital to Expense ratio will be low, since your current assets are still out in the field. Re-calculate that ratio on October 31, when your barley is in the bin. 
4. Cut costs: If most of your financial indicators are grim, it’s time to look at your operation. “There are efficiencies to be found across the board on land, machinery, labour, agronomy and other operating expenses,” Macfie says. “Keep looking.”

Looking to the future

Lieverse describes herself as a “disruptive agricultural banking leader.” But even innovative bankers still calculate ratios. 

“Banking has a bit of tradition to it,” she says.

Most of Lieverse’s clients are operational experts. “I very seldom stop at an operation where a producer doesn’t know their costs of inputs down to the acre and cannot articulate soil health with a degree of expertise.”

But some farmers have become experts in these areas at the expense of “soft side” business aspects. “Many farms have struggled in operational items related to finance and HR.”

When rising land prices create strong balance sheets, Lieverse says, “you can make mistakes and not really be forced to learn from them.” This probably won’t always be the case. “We’re going into a commodity cycle where margins are tightening. What are you doing to future-proof the farm?”

“Financial ratios are great because they tell us how the farm has done,” Lieverse says. “But what I’m equally interested in is hearing from producers about what they’re going to do. Financial ratios are about looking in the rearview mirror. But I know that operators are driving looking out the window ahead.”

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The value of the sector totalled $832.5 billion as of Dec. 21, 2024, up by $38.9 billion or 4.9 per cent from the same date the previous year. That compares with 8.5 per cent growth in 2023.

Farm equity rose in every province but gains in Saskatchewan and Alberta accounted for more than two-thirds of the national increase.

Lower crop values weigh on current assets

Farmers’ total assets grew by 6.3 per cent in 2024 to reach $991.5 billion with most of the growth due to the rise in farm real estate value. Farmland value rose 7.0 per cent to $713.3 billion in 2024.

The value of current assets (short-term assets like cash and crop or livestock inventory) fell by 0.8 per cent to $57.9 billion, mostly due to lower values for crop inventory. The value of crop inventories was down by 17.9 per cent to $21.9 billion as crop prices fell by 14.6 per cent, StatCan said.

Poultry and market livestock inventory value grew by 26.6 per cent to $16.5 billion on sharply higher prices. However, inventory fell by 4.9 per cent.

Farmers’ ability to pay interest declines

Canadian farmers’ total liabilities grew 14.4 per cent to reach $159.0 billion at the end of 2024. This was the largest percentage increase in total liabilities since tracking began in 1981 said StatCan. Most of the rise was due to long-term liabilities. Rising liabilities in Alberta, Ontario and Quebec accounted for more than two-thirds of the national increase.

At the same time, farmers’ ability to meet interest payments fell for the second consecutive year. The interest coverage ratio settled at 2.12 at year’s end. This was the lowest ratio since 2007.

A lower ratio indicates that farms are less able to service debt obligations.

The interest coverage ratio continued to deteriorate because of the decrease in farm income, said StatCan. That decrease was due to a decrease in crop inventories and higher interest expenses, it said.

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Farmers’ realized net income fell by $3.3 billion to $9.4 billion in 2024, a nearly 26 per cent decline. Excluding cannabis, the figure improves slightly to $9.7 billion or a 23 per cent decline.

Realized net income is the difference between farm cash receipts and operating expenses, minus depreciation and plus income in kind, StatCan said.

Realized net income fell across all provinces except Nova Scotia and Prince Edward Island. Saskatchewan saw the largest decline — a drop of $1.3 billion — largely due to decreased crop revenues. Farm operating costs also rose by 0.6 per cent.

The preliminary total of farm cash receipts is $97.9 billion for 2024, down $1.6 billion. Receipts were down in five provinces. They were led by Saskatchewan, which saw a $1.3 billion decline, and Manitoba, which was down $433.5 million over the previous year.

Meanwhile, Ontario saw the largest increase in farm cash receipts on the year, up by $179 million at $22.663 billion.

Total crop receipts declined 6.2 per cent to $52.1 billion in 2024, largely due to lower prices for most grains and oilseeds.

Livestock receipts rose nearly seven per cent in 2024 to $39.9 billion, buoyed by higher prices. Cattle and calf receipts gained nearly 12 per cent over 2024 to total $16.7 billion as cattle markets saw record high prices.

Average prices for cattle and calves were more than 50 per cent above five and 10-year averages, StatCan said.

Total farm operating expenses after rebates were $78.3 billion in 2024, up 2.4 per cent from 2023. Interest expenses led the gain, even as the Bank of Canada cut its key interest rate.

Producers took on more debt, which drove up interest expenses. Farm debt rose 14.1 per cent in 2024 — the largest increase since 1981.

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Declining farm income could ripple across the rural economy in a presidential election year, as producers have become more cautious about making large asset purchases such as new machinery. Crop farmers are wrestling with corn and soybean prices hovering near four-year lows.

The estimated decline is less steep than the agency’s February forecast, which called for the largest recorded year-to-year drop in net U.S. farm income in 2024 on rising farm expenses.

USDA now estimates this year’s net farm income, a broad measure of profitability in the agricultural economy, will hit $140 billion in 2024, down 4.4 per cent or $6.5 billion from a year earlier.

Adjusted for inflation, net farm income in 2024 is forecast to drop by $10.2 billion, or 6.8 per cent, from a year earlier.

In February, USDA forecast that net farm income would fall more than 25 per cent, or nearly $40 billion, from a year earlier, a record year-over-year dollar drop.

USDA economists changed their estimates after gaining access to information unavailable for the previous forecast, such as the latest U.S. farm census, said USDA Economic Research Service economist Carrie Litkowski, who leads the agency’s farm income team.

For example, fertilizer expenses are now expected to ease as crop farmers look to cut production costs. Meanwhile, cattle prices soared, dairy prices turned higher and the spread of avian influenza has led to supply constraints for eggs, Litkowski said.

In fact, cash receipts for egg sales this year are expected to jump about 35 per cent, or $6 billion – the largest increase in the livestock and animal products group, USDA data shows.

“In February, we did not anticipate that egg prices were going to rise as much as they had,” Litkowski said.

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The balance sheet of the agricultural sector, released today, gives the total value of all farm equity, assets and liabilities as of Dec. 31, 2023.

The farm sector’s equity reached $784.7 billion in 2023, up $55.1 billion. This builds on two years of double-digit gains, StatCan said.

Every province posted gains in farm equity except British Columbia, which saw a 2.1 per cent decline. Saskatchewan saw the largest increase at 11.5 per cent.

The value of total farm assets reached $923.5 billion, up $62.3 billion from the previous year. Almost all of the increase came from gains in farm real estate value.

Again, only B.C. saw a loss in this category of 2.1 per cent. Ontario posted the largest gain of $19.3 billion or 9.4 per cent.

The value of poultry and market livestock inventories rose nearly 19 per cent, up $2.1 billion to $13.0 billion. The increase is due to higher prices as inventories across most categories were down, StatCan said.

The largest provincial gain was in Alberta, where values were up $1.3 billion.

The value of crop inventories fell 21.6 per cent to $24.1 billion at the end of the year—the first decline in four years. StatCan attributed the decline to lower crop prices and increased crop marketings that led to lower end-of-year stock.

The value of farms’ total liabilities hit $138.8 billion, up 5.5 per cent or $7.2 billion. An $8.3 billion increase in long-term liabilities offset a $1.2 billion decrease in current liabilities.

Total liabilities rose across all provinces.

The interest coverage ratio, which measures farmers’ ability to make interest payments, fell to 3.063 from 5.375 in 2022, indicating a decline in farms’ ability to repay debts. This was the result of lower total net income. However, the ratio is still higher than it was from 2018 to 2021.

Earlier this year, analysts called farmers’ financial position very strong—at least on paper.

At the end of 2023, farms’ solvency ratio (ratio of total liabilities to total assets) was 0.150 and the ratio of liabilities to equity (leverage) was 0.177.

At the end of 2022, the ratio of farmer liabilities to equity (leverage) was 0.180, and the ratio of liabilities to assets was 0.153. Eric Micheels, a professor of agricultural and resource economics at the University of Saskatchewan, called this “a very strong balance sheet.”

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