By Alan Bjerga, Copyright 2013 Bloomberg.
U.S. farm income will set a record in 2013, reflecting the anticipated rebuilding of crop reserves depleted by drought that will not be sold until future years, the U.S. Department of Agriculture said.
Net income will climb to $128.2 billion from a revised $112.8 billion last year and $117.9 billion in 2011, the USDA said today in its first farm-profit 2013 forecast. The total includes $16.6 billion for the value of crops not sold by Dec. 1. Excluding unsold crops, cash profit will fall from 2012.
Revenue to farmers for crops sold to companies such as Cargill Inc. or Archer-Daniels-Midland Co. will fall 1.5 percent to $216.3 billion, and livestock sales will jump 2.2 percent to $176.5 billion even as cattle herds fall to a 61-year low.
"You’re going to see production go up, but prices go down, and that will lead to less revenue on corn and soybeans," said Chris Hurt, professor of agricultural economics at Purdue University in West Lafayette, Indiana. "There is a lot of optimism right now, and I don’t know that the optimism is justified given how low prices could go."
Agricultural profits fell last year as the drought devastated crops and forced ranchers to cull herds.
Andrew Beck, chief financial officer of Agco Corp., maker of Massey Ferguson tractors, said in a conference call last week that farmer finances should be enough to "support healthy demand" for his company’s products.
Expenses will be $249.8 billion, up 5.7 percent from last year, according to the agency.
The decline in cash income is a response to the waning drought, as increased production drives prices lower, said Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri.
"If you assume normal weather, you 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, Westhoff said. "How much that will affect individual producers will depend on their own individual circumstances."