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Despite Drought, Record-High Farm Incomes Expected

August 29, 2012
drought soybean field
  

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.


08 28 12b chart2


Get the 2012 forecast for farm sector income.

Watch AgDay's report:



 


 

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COMMENTS (5 Comments)

1466 - IN
IF THEY THINK FARMERS MAKE SO MUCH MONEY, EXPLAIN THIS. I HAVE NEVER MADE MORE MONEY THEN I PAY IN PROPERTY TAXES. I FARM AND OWN 800 ACERS AND NETED $17000.00 LAST YEAR. I WORKED 3000 HOURS. I SURE MADE ALOT OF MONEY ON A 4 MILLION DOLLAR OPERATION.
9:02 PM Sep 1st
 
Lynette - Hamilton, OH
Not sure what ERS and agweb editors are smokin but I would like some of that. This is the most irresponsible, misleading report I have ever read since Chicken little. If incomes are forecasted so high, then why are states declared disaster and government assisted loans made available? We have no crops, we have no feed for our livestock, hmmmmm. But we are gonna be rich, right? Tell that to my banker when the farm payment is due.
8:49 AM Aug 30th
 
sdproducer2011 - Midland, SD
PullMy Finger: Read the article again. Net farm income is projected to be up 3.7% from last year! Looks to me like crop farmers are doing very well at the expense of livestock producers. I say do away with subsidy programs, let ethanol stand on its own, reform disaster programs to reimburse producers for inputs only and make permenent the CURRENT tax rates. (Permenent repeal of the death tax!)
7:34 PM Aug 29th
 
sdproducer2011 - Midland, SD
PullMy Finger: Read the article again. Net farm income is projected to be up 3.7% from last year! Looks to me like crop farmers are doing very well at the expense of livestock producers. I say do away with subsidy programs, let ethanol stand on its own, reform disaster programs to reimburse producers for inputs only and make permenent the CURRENT tax rates. (Permenent repeal of the death tax!)
7:34 PM Aug 29th
 
PullMyFinger - Chappell, NE
Let's be sure to scream this from every urban rooftop while being sure never to mention or even question fuel and fertilizer prices. Or any one of a thousand other farm input prices.
6:06 PM Aug 29th
 



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