Net farm income seen to climb 6 percent
By Larry Dreiling
Net farm income is forecast to be $120.6 billion in 2013, up 6 percent from 2012’s estimate of $113.8 billion, according to a report by the U.S. Department of Agriculture’s Economic Research Service.
After adjusting for inflation, 2013’s net farm income is expected to be the second highest since 1973. A return to trend yields would lead to record crop production levels and result in substantial year-end crop inventories.
Net cash income—which measures the difference between cash expenses and the combination of commodities sold during the calendar year plus other sources of farm income—is forecast at $120.8 billion, down just over 10 percent from 2012. Even so, 2013’s forecast would be the fourth time net cash income, after adjusting for inflation, has exceeded $100 billion since 1973.
The projected nominal $13.1 billion increase in total expenses in 2013, to $354.2 billion, continues a string of large year-to-year movements that have taken place since 2002. In both nominal and inflation-adjusted dollars, 2013 production expenses are expected to be the highest on record. Rent, labor, and feed are the expense items expected to increase the most in 2013.
Farm sector assets, debt, and equity are all forecast to increase in 2013. As in the last several years, increases in farm asset value are expected to exceed increases in farm debt, with farm real estate the main driving force. Confirming the strength of the farm sector’s solvency, both the debt-to-asset ratio and debt-to-equity ratio are expected to reach historic lows.
Secretary of Agriculture Tom Vilsack Aug. 28 lauded the forecast.
“This week’s forecast of a $6.8 billion increase in net farm income is a testament to the resilience and productivity of U.S. farmers and ranchers, and a further sign of the positive momentum they have achieved over the past five years,” Vilsack said.
“A 6 percent increase in this key measure would be the second highest inflation-adjusted amount since 1973, even as agriculture has worked hard to recover from an historic drought and other disasters. I am confident that our farmers and ranchers will continue to show the determination and innovation that has been the hallmark of American agriculture for generations.
“To help continue their strong momentum, producers and rural communities are counting on Congress to provide a comprehensive, long-term Food, Farm and Jobs Bill that will lend certainty to federal farm policy—as well as passage of a common sense immigration reform measure to ensure a stable and dependable agricultural workforce in the years to come.”
Other highlights of the report include:
The value of livestock production is expected to increase 5.2 percent in 2013, with receipts increasing nearly 4.9 percent. The projected gains result mostly from expectations of higher prices. Crop receipts are forecast to decline by $12.4 billion (5.5 percent) in 2013, which would be the first decline since 2009. Nonetheless, the value of crop production is expected to rise 2.7 percent in 2013, with increases boosting anticipated year-end crop inventories.
At $354.2 billion, total expenses are projected to increase $13.1 billion in 2013, continuing a string of large year-to-year increases since 2010. In both nominal and inflation-adjusted dollars, 2013 production expenses are expected to be the highest on record.
Increases in farm asset values are expected to continue to exceed increases in farm debt, leading to expectations of another new record high for farm equity.
Farm financial risk indicators are expected to continue at historically low levels.
To learn more about the report, visit http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/2013-farm-sector-income-forecast.aspx#.Uh4GrhY9qok.
Larry Dreiling can be reached by phone at 785-628-1117, or by email at email@example.com.