According to the January 2023 Canadian Farmers Sentiment Index farmers are becoming more optimistic about their current and future financial performance relative to past months. While the current financial performance is above the neutral position at 119, the future financial performance score of 85 remains in negative territory.
In isolation this is a positive trend developing for primary producers in Canada, but it’s worth a deeper dive to look at what else is happening in parallel. This is where the January Canadian Farmer Sentiment index gets really interesting.
The Canadian Farmer Sentiment Index is produced every two months by RealAgristudies, a market research collaboration between RealAgriculture and Agristudies. In January, 559 producers participated in the survey outlining how they feel on a number of topics included finances, government support, the commodity markets, and mental health.
As you can see below, income expectations are rising at the same time that confidence in grain marketing strategy is declining moderately and outlook for commodity prices as substantially declined since January.
We have seen fertilizer prices decline since September 2022 when the Canadian Farmers Sentiment Index was launched. Fertilizer prices have sucked up the majority of the oxygen in the room so to speak, and the recent price decline has farmers thinking about better margins even in the midst of a weakening sentiment on commodity prices.
The other interesting variable fluctuation is that interest rates have increased during this five-month span. Time will tell if the increasing cost of debt is more of a lagging indicator and will play more or a role in profitability in the coming months. This may be one of the reasons that the future profitability rating is still in negative territory, although improving. This is something that we will be watching closely in the coming months.
Producers in Western Canada are feeling much better about their current financial performance in relation to 12 months ago than their eastern peers. In January, 47.6% of western Canadian producers felt that their current financial performance was in better shape than 12 months ago, meanwhile in Eastern Canada only 25.6% felt they were better off.
In terms of future financial performance the two regions are more equal, with the west slightly ahead at 16.4% saying they will be better off financially twelve months from now. The majority of producers in Canada believe that that they will be the same financially a year from now.
Listen below to Shaun Haney and Justin Funk discuss the improvement in farm financial performance in January