Canadian Farm Equity Ticks Higher

Canadian farm equity continued to rise in 2020, even as liabilities increased more than assets.

A Statistics Canada report Thursday pegged national farm equity as of Dec. 31, 2020 at $571.5 billion, up $28.8 billion or 5.3% compared to a year earlier. However, it marked the third consecutive year where total liabilities (+5.5%) rose at a faster pace than total assets (+5.3%)

Underpinned by farm real estate values which increased by nearly $30 million or 6.1% to $521.8 billion, total farms assets rose by $34.8 billion to $686.7 billion in 2020. The value of farm machinery gained 3.9% to $59.7 billion, while crop inventories were up 4.4% to $20.9 billion on higher prices. Significantly higher commodity prices in the latter half of 2020, combined with strong demand for agricultural products and low interest rates all contributed to the increased value of farm real estate, StatsCan said.

On the other hand, the value of total farm liabilities increased by $6 billion to $115.3 billion in 2020, the smallest annual gain since 2014.

Farm equity rose in every province, with Ontario (+5.5%) and Alberta (+4.9%) accounting for over one half of the national increase.

The Canadian farm debt-to-asset ratio (0.17) and debt-to-equity ratio (0.20) in 2020 remained unchanged from 2019. Nevertheless, both were at their highest levels since 2009, an indicator that a growing share of productive agricultural assets are financed by creditors as opposed to farm owners.

Strong growth in farm net income in 2020, however, improved the return on assets and return on equity ratios from their 2019 levels. Both ratios are now near the 10-year averages, 0.025 and 0.022 respectively, following recent lows in 2018.

The balance sheet of the agricultural sector integrates data already produced by Statistics Canada, such as farm debt, value of farm capital, livestock and crop estimates, farm product prices, and selected data from the Farm Financial Survey