USDA says despite drought conditions in the Plains and Midwest, net farm income is expected to exceed $122 billion in 2012 and net cash income is expected to exceed $139 billion, which is realized, both would be records. 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, says USDA.
"Extreme hot and dry conditions in the Plains and Corn Belt are drastically cutting projected corn and soybean yields," says USDA. "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."
Meanwhile, USDA says farm equity is expected to increase to an all-time high of almost $2.3 trillion in 2012. "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 nonreal estate debt," it states. "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."
In 2011, USDA says median total farm household income increased by 5.4%, to $57,067, and is expected to increase another 1.2% in 2012, to $57,762. Most farm households operate small farms and rely solely on off-farm income, which is forecast to rise 3.2% in 2012. In contrast to the farm households that operate small farms, households associated with commercial farms derive the majority of their income from farming activities. Their median income from farming increased an estimated 7.9% in 2011 to $84,697, and their total household income also increased by 7.9%, to $127,054, says USDA.