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Farm Income Increases, while Debt Decreases

September 6, 2011
By: Ed Clark, Top Producer Business and Issues Editor

The numbers show what everyone knows. In just one year, the bottom line has improved substantially for U.S. farmers, particularly those in the Heartland.

USDA’s farm sector balance sheet estimates for 2011 show that cash receipts for crops will increase 19.4% over 2010, with livestock up 15.8%, both eclipsing rising expenses, which will also be up double-digits at 11.4%. Returns to farm operators will rise 33.4%, a new report released Aug. 30 by USDA’s Economic Research Service (ERS) says.

The three most important factors driving high asset values (including farm real estate) are:
  1. Higher expected income from production assets
  2. Favorable borrowing costs
  3. Expected growth of future returns on these investments.

 

Farm real estate and non-real estate asset values are expected to rise from $2.18 trillion in 2010 to $2.32 trillion in 2011 (up 6.6%).

Farm business debt is expected to fall from $246.9 billion in 2010 to $242.1 billion in 2011. As a result, farm equity is expected to increase from $1.93 trillion in 2010 to $2.08 trillion in 2011. Debt-to-asset ratios and debt-to-equity ratios are expected to decline, indicating that the farm sector overall is more solvent than it was in 2010.
 
In 2011, the value per acre of farmland and farm buildings in the U.S. is forecast by USDA to rise by 7.1%. The value of land varies widely by state, however. USDA/NASS reported in its “Land Values: 2011 Summary,” a report issued earlier this year, that in 2010, land values increased by greater than 15% in by these states: 24.4% in Iowa; 17.1% in Nebraska; 16.3% in Illinois; and 15.3% in North Dakota.
 
But land values didn’t rise everywhere, and farmland values are highly localized, ERS says. Values declined by 4.4% in Rhode Island; 3.1% in New Jersey; Massachusetts, 2.7%; and fell by 1.5% in California, the latter the nation’s No. 1 agricultural state when it comes to value of its crops and livestock.
 
The new ERS report is called, “Farm Income and Costs: Assets, Debt, and Wealth."
 

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