Roger Bernard, Farm Journal Policy & Washington Editor
U.S. net cash income is forecast to reach $85.3 billion in 2010, up $16.1 billion (23.3%) from 2009, and $13.4 billion above its 10-year average of $71.8 billion. That's according to the latest farm income update from USDA's Economic Research Service (ERS).
While many focus on net farm income, we think net cash income is a much more accurate barometer of U.S. agriculture. USDA notes the following relative to net farm income versus net cash income:
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.
As for net farm income, USDA's forecast is for that to be $77.1 billion in 2010, up $14.9 billion (24%) from 2009. The 2010 forecast is $12.3 billion above the average of $64.8 billion in net farm income earned in the previous 10 years.
The $77.1 billion forecast for 2010 remains the fourth largest amount of income earned in U.S. farming. USDA says, "The top five earnings years have occurred since 2004, attesting to the profitability of farming this decade. Farm income exceeded $80 billion in 2004 and 2008 and topped $70 billion in 2005 and 2007."
In a teleconference today highlighting the farm income forecast and the U.S. export forecast, both of which were updated today, USDA Sec. Tom Vilsack credited the stronger performance forecast for U.S. agriculture in 2010 to the 2008 Farm Bill and efforts by the administration to move the economy forward. He also lauded the "hard work" and productivity of U.S. agriculture as another factor helping to bring an income recovery.
U.S. agriculture entered the recession "with little debt and that has helped us to survive," Vilsack said. "I am hopeful that agriculture is leading the way to an economic recovery."
Vilsack detailed farm household income is also forecast to rise by 5.8% in 2010, something he said was key since that includes the impact of off-farm income. "Off farm income is up 3.3%," he noted, "a rate faster than the general economy." He reasoned that's why rural areas have recovered faster than non-rural areas in terms of the employment picture.
USDA also notes the following highlights of their latest farm income forecasts:
- After declining more than 20% in 2009, all three measures of farm sector earnings are forecast to rise in 2010.
- Net cash income is expected to rise more than 23%, to a level above its previous 10-year average.
- Net value added, at $127.3 billion, is expected to be up $15.2 billion from 2009, and remain 17.7% above its 10-year average. An increase in the value of livestock production accounted for almost all of the upward movement in net value added. Value of dairy production rose by 26.2% with the value of meat animal production up 14.6% and the value of poultry and egg production rising 8.4%.
- Net farm income, while forecast to be $10.3 billion below its all-time record in 2004, has shown a rebound from 2009, a year in which demand for agricultural products fell worldwide due to the global recession.
- Total expenses are forecast to increase moderately.
- Total production expenses in 2010 are forecast to be 1.1% higher, reversing the 4.1% drop in 2009. The increase is far below upward movements of 15.7% and 8.8% recorded in 2007 and 2008, respectively.
- Cash receipts are expected to increase 6.5%, due mainly to higher livestock receipts.
- Crop receipts are forecast to increase a modest 0.4% with soybean and cotton receipts expected to show large gains while corn receipts record the largest annual decline.
- Livestock receipts are expected to increase $17.7 billion in 2010, led by a 26-percent surge in cash receipts for dairy.
- Government payments are forecast to decrease 2.7% in 2010.
- Reversing two years of slight increases, direct payments are projected to decrease in 2010 and will be 22% below the 5-year average for 2005-2009. Countercyclical payments are forecast to decrease by 79% in 2010.