The value of equity in the Canadian farm sector increased slightly more than previously expected in 2023, although the size of the gain was still well down from a year earlier.
Statistics Canada reported Thursday that farm equity as of Dec. 31, 2023 amounted to $788.3 billion, up $57 billion or 7.8% from the previous year. That represents a small increase from StatsCan’s June forecast, which put 2023 farm equity at $784.7 billion, a 7.6% year-over-year increase.
In comparison, farm sector equity increased by $83.6 billion or nearly 13% in 2022, the largest percentage increase in records going back to 1981. In 2021, farm equity grew by 10%.
The value of total farm assets increased $64.3 billion or 7.4% to $927.2 billion in 2023. Almost all of that gain was due to an increase in farm real estate, which was up $60.4 billion or 9%. According to Farm Credit Canada, 2023 marked the second consecutive year of double-digit increases in the average value of farmland, with the gain in 2023 being the second largest since 2014.
The value of poultry and market livestock inventories gained as well, rising $2.2 billion or 20.3% to $13.1 billion, mostly because of higher prices
On the other hand, the value of crop inventories was down $5.1 billion or more than 16% to $26.7 billion as of Dec. 31, 2023, marking the first decline in five years. The decrease was the result of increased crop marketings — which led to lower end-of-year stocks — as well as lower crop prices in 2023 compared with 2022, StatsCan said.
On the other side of the ledger, the value of total farm liabilities was up 5.5% or $7.3 billion to $138.9 billion in 2023, due to a $6.9 billion increase in long-term liabilities and a $400 million rise in current liabilities.
Meanwhile, the interest coverage ratio, which measures the ability of a farm business to meet its interest payments, fell to 3.198 in 2023 from 5.489 in 2022. A lower interest coverage ratio (net income before taxes plus interest expense, divided by interest expense) indicates that businesses are less able to repay their debts. StatsCan blamed the contraction in the ratio on lower total net income, which was due to the drop in crop inventories, and higher interest rates.
Despite the year-over-year decrease, the ratio remained higher than what it was from 2018 to 2021.
