U.S. net cash farm income is forecast at $96.3 billion for 2012, down $12.5 billion (11.5 percent) from 2011, but would remain $15.9 billion above the 10-year average (2002-2011) of $80.3 billion, according to the latest projections from USDA. Net farm income is forecast to be $91.7 billion in 2012, down $6.3 billion (6.5 percent) from the 2011 forecast.
Net farm income reflects income from production in the current year, whether or not sold within the calendar year; net cash income reflects only the cash transactions occurring within the calendar year. Net farm income is a measure of the increase in wealth from production, whereas net cash income is a measure of solvency, or the ability to pay bills and make payments on debt.
All three measures of farm income are expected to decline this year, but remain above 2010 levels. Net cash income is forecast at $96.3 billion, a decline of $12.5 billion from 2011.
- Crop receipts are expected to experience a slight increase in 2012. A marginal decline is anticipated for 2012 U.S. livestock sales.
- Increases in sales of corn, most other feed grains, and peanuts are predicted to offset declines in wheat, hay, vegetables/melons, and fruits/tree nuts.
- Drought in the U.S. in 2011 is expected to depress 2012 sales of many crops.
- Sales of red meats are anticipated to remain high, while a price-led decline in milk sales is forecast.
- Total production expenses are forecast to rise $12.5 billion (3.9 percent) in 2012 to $333.8 billion.
- The major 2012 crop-related expenses (seeds, fertilizer, pesticides) are projected to increase moderately (around 1.0 percent) as a group while the key livestock-related expenses (feed, livestock/poultry purchases) are forecast to rise 2.1 percent.
- Government payments paid directly to producers are expected to total $11.0 billion in 2012, a 4-percent increase from the preliminary estimate of $10.6 billion paid out in 2011.
As for government payments, the primary increase comes via an increase in the percentage of acreage that producers receive the payments on -- Direct payments under the Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $4.96 billion for 2012. This 5.3 percent increase in direct payments over 2011 is largely due to the fact that the percentage of base acres on which direct payments are made increased from 83.3 percent for the 2011 crop year to 85.0 percent for the 2012 crop year.
Total production expenses in 2012 are forecast to rise $12.5 billion (3.9 percent) to $333.8 billion. While not as large as the increase in 2011, this forecast is the second consecutive increase of over $10 billion. In 6 of the last 8 years, the increase in expenses has been double-digit, with another nearly so. As in 2011, the 2012 figure will set both nominal and inflation-adjusted records.
Every expense other than livestock/poultry purchases, fertilizer, and net rent to nonoperators is expected to increase in 2012. The four expense categories that are expected to increase more than $1 billion are (1) feed, (2) labor, (3) marketing, storage, and transportation, and (4) miscellaneous expenses. Some expenses that rose significantly in 2011 will rise more slowly or even decrease slightly in 2012. Among them are livestock and poultry purchases, seeds, fertilizer, and fuels/oils.
In terms of their effect on crop versus livestock farms, the major 2012 crop-related expenses (seeds, fertilizer, pesticides) are expected to rise around 1.0 percent ($560 million) while the major livestock-related expenses (feed, livestock and poultry purchases) are forecast to rise 2.4 percent ($1.9 billion). These increases are small compared to the $8.1-billion (16.8-percent) rise in the major crop-related expenses and the $15.4-billion (23.8-percent) rise in the major livestock-related expenses in 2011. Crop farms will be able to absorb the increases in expenses more easily as the value of crop production rises 3.1 percent while the value of livestock production rises only 0.6 percent.