Increases in income reflect large corn and soybean price increases, as well as large increases in crop insurance indemnities

U.S. net farm income is forecast to exceed $122 billion in 2012, up 3.7% from last year, and net cash income is expected to exceed $139 billion, up 3.4% from 2011, both record nominal values. USDA's Economic Research Service (ERS) released its updated farm income forecasts this week. 

The expected increase in income reflects large price-led gains in corn and soybean receipts as well as large increases in crop insurance indemnities. Crop farm gains should be more than enough to offset livestock farmers' higher feed expenses and a decline in sales of wholesale milk, ERS reports.

Extreme hot and dry conditions in the Plains and Corn Belt are drastically cutting projected corn and soybean yields. With corn and soybean supplies for the 2012 marketing year expected to be the lowest in 9 years, prices are increasing dramatically, resulting in higher expected 2012 calendar-year receipts for many crops.

Despite the severity of the 2012 drought, shortfalls in marketing year production do not necessarily have a detrimental impact on sector-wide farm income.  Shortages raise the prices farmers receive for crops sold in calendar-year 2012, and crop insurance partially offsets the impact of lower yields.  As a result, in 2012:

• All three major measures of farm income are expected to achieve all-time nominal record highs. Inflation-adjusted net farm income is the second-highest since 1970.

• Crop receipts are leading the 2012 income increase, with strong gains in corn, soybean, hay, and wheat sales reflecting higher commodity prices. A large anticipated rise in other farm income reflects large increases in crop insurance indemnity payouts.

• A decline in dairy sales is forecast, reflecting expectations of lower farm prices for milk.
  

• Government payments paid directly to producers are expected to total $11.1 billion in 2012, a 6.3% increase from $10.4 billion paid out in 2011.

Farm equity is expected to increase to an all-time high of almost $2.3 trillion. Farm asset growth in 2012 is expected to exceed increases in farm debt as increases in the value of farm real estate and financial assets more than offset an anticipated rise in non-real-estate debt. Farm real estate debt is predicted to decline slightly in 2012. Debt repayment capacity utilization (DRCU)--a measure of farm exposure to financial risk--is forecast to be at its lowest since 1970.

Get the 2012 forecast for farm sector income.

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