USDA Pegs 2010 Net Cash Farm Income at a Record

November 30, 2010 05:40 AM

U.S. net cash farm income is now put at $92.5 billion for 2010, a nominal record and 2.4% above the prior record set in 2008 and is expected to rise nearly 34% from 2009 and 28.8% above the previous 10-year average, according to the latest update from USDA. Net farm income is forecast at $81.6 billion in 2010, up 31% from 2009 and 26% higher than the 10-year average of $64.8 billion for 2000-2009.

In their latest update, USDA's Economic Research Service (ERS) also noted:

  • The net value added of agriculture to the U.S. economy in inflation-adjusted terms reached its two highest levels since the mid 1970s in 2004 and 2008.
  • Inflation-adjusted net cash income has reached levels not seen since the mid-1970s for the fourth time since 2004, including the forecast for this year.
  • The mid-1970s was the last comparable period when U.S. farming enjoyed multiple years of sustained levels of high output and income.

Net cash farm income is seen as a more accurate picture of the ag sector than net farm income as ERS points out it includes only cash receipts and expenses and is generally less variable than net farm income.

"Farmers can manage the timing of crop and livestock sales and of the purchase of inputs to stabilize the variability in their net cash income," ERS detailed. "Nonetheless, during 2000-2009 net cash income showed a significant degree of variability. In the 6 years when net cash income rose, the average increase was 10.4%. In years when net cash income decreased, the average decrease was 15.9%."

Other highlights of the data include:

  • Total expenses are forecast to increase moderately.
    • Total production expenses in 2010 are forecast to be 2.0% higher, reversing the 4.1% drop in 2009. This is in stark contrast to the 15.7-and 8.8% increases in production expenses recorded in 2007 and 2008.
  • The 2010 forecast is for a rise of 10.4% in cash receipts from sales of farm commodities.
    • Crop receipts are expected to increase $9.4 billion with cotton, soybean, and corn receipts expected to show the largest gains.
    • Livestock receipts are expected to increase $20 billion in 2010, led by surges in cash receipts for dairy and hogs.
  • Government payments are forecast to be $12.4 billion in 2010, a 1.5% increase from last year.
    • Price-sensitive crop and milk commodity program payments are expected to decrease by a combined $2.3 billion in 2010.
    • Other government payments are expected to increase by $2.5 billion led by a nearly $2.2 billion increase in disaster assistance payments.

As for the debt and asset situation (asset values and farm debt outstanding are fundamentally driven by expected returns on investments in farmland and other farm capital, and by interest rates), ERS said while these do vary across the country, the value of farm sector business assets is expected to rise in 2010. Farm sector asset values are forecast to rise from $2.057 trillion in 2009 to $2.120 trillion in 2010 (a 3.1% increase). The values of real estate assets; crop, livestock/poultry, and purchased input inventories; machinery and equipment; and financial assets are expected to rise in 2010.

Interest rates have declined slowly throughout 2010, while credit has remained available through major lenders, ERS said. But like others, farm borrowers have faced tighter credit requirements as well.

Farm sector debt is expected to fall from about $245.4 billion in 2009 to about $240.3 billion in 2010, according to ERS, with the decline in real estate debt seen at just over $2 billion (-1.7%) while the decline in nonreal estate debt is forecast to be nearly $3 billion (-2.6%).

The farm business sector's debt-to-asset ratio is expected to decline to 11.3% and debt-to-equity is expected to decline to 12.8% in 2010, indicating that the farm sector's solvency position remains strong. The debt-to-asset ratio has been 12% or less since 2002.



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