Farm Income Projected To Increase 14 Percent in 2013

Feb 13 - Net farm income is forecast to be $128.2 billion in 2013, up nearly 14 percent from 2012's revised forecast of $112.8 billion, according to the U.S. Department of Agriculture. After adjusting for inflation, the USDA expects 2013's net farm income to be the highest since 1973. Net cash income is forecast at $123.5 billion, down almost 9 percent from 2012.

Not all crops produced in 2013 will be sold by the end of the 2013 calendar year; the USDA anticipates substantial increases in the annual quantity and value of crop inventories, particularly for corn. As a result, crop cash receipts are expected to decline in 2013. The small projected increase in livestock receipts is not sufficient to offset increasing expenses. Nevertheless, after adjusting for inflation, net cash income is expected to remain high by historical standards.
Highlights from the USDA’s report include:

• A return to trend yields would lead to record crop production levels and result in substantial year-end crop inventories and higher net farm income forecast for 2013.
• Net cash income is forecast to decline by nearly 9 percent from 2012. Unlike net farm income, net cash income does not account for capital consumption, change in inventories and non-money income.
• The projected $19.2 billion increase in total expenses in 2013 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, at $353 billion, are expected to be the highest on record.
• The value of livestock, dairy and poultry production is expected to increase 3.5 percent in 2013, with broilers, cattle/calves and dairy leading the way. The projected gains result mostly from expectations of price increases.
• The value of crop production is expected to rise 11 percent in 2013, despite a predicted decline in crop receipts. The difference indicates the significant role of crop inventories. Crop receipts are forecast to decline by $3.2 billion in 2013, which would be the first decline since 2009.
• The value of corn production, which reflects cash receipts, home consumption and the annual value of inventory change, is expected to rise in 2013 as large anticipated production increases more than offset expected price declines.
• U.S. Soybean production is expected to increase in 2013, but quantity sold during the year is expected to decline, with more production expected to go into 2013 end-of-year inventories.
• An increase in the annual price for wheat is expected in 2013, but an anticipated decease in the quantity of 2013 wheat sold and a decline in the value of annual end-of-year wheat inventories are expected to reduce cash receipts (down 2 percent) and value of production (down 4 percent).
• The value of potato production is expected to decline $226.2 million (5.6 percent) in 2013, as declines in both quantity sold and end-of-year stocks more than offset a predicted increase in price.
• 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.
• Government payments paid directly to producers are expected to total 2013 under current law, as applied by USDA’s program agencies.

Agriculture Secretary Tom Vilsack issued the following statement about the 2013 farm income forecast:

"Today's forecast for the strongest net farm income in four decades is another positive testament to the resilience and productivity of U.S. farmers and ranchers. American agriculture continues to endure an historic drought with tremendous resolve, and last year was an important reminder of the need for a strong safety net. The commitment of American producers to embrace innovation and adapt to new challenges has helped fuel growth for American agriculture over the past five years. I am also heartened that our farmers' keen business sense is continuing the recent trend of strong farm finances, with farm equity set to reach another record high in 2013.”

Observers commenting to Bloomberg News were less sanguine. “You’re going to see production go up but prices go down,” said Chris Hurt, professor of agricultural economics at Purdue University. “There is a lot of optimism right now and I don’t know that the optimism is justified given how low prices could go.”

Assuming normal weather, one would have to think that revenue levels for 2013 will be down from 2012 when the drought pushed prices higher and farmers qualified for record insurance payments, Bloomberg was told by Pat Westhoff, director of the Food and Agricultural Policy research Institute at the University of Missouri. “How much that will affect individual producers will depend on their own individual circumstances,” according to Westhoff.

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