U.S. net cash income in 2011 is forecast at $98.6 billion, up $7.3 billion (8%) from 2010, and $26.8 billion above its 10-year average (2000-2009) of $71.8 billion, according to an update today from USDA's Economic Research Service (ERS).
USDA also said that net farm income is forecast to be $94.7 billion in 2011, up $15.7 billion (19.8%) from the 2010 forecast. The 2011 forecast is the second highest inflation-adjusted value for net farm income recorded in the past 35 years. The top five earnings years for the past three decades have occurred since 2004, attesting to the profitability of farming this decade.
Why focus on net cash farm income instead of net farm 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.
Other highlights from the update:
- The forecast is for a rise of 9.1% in cash receipts from sales of farm commodities.
- Crop receipts are expected to increase $24.1 billion, with cotton, soybean, wheat, and corn receipts expected to show the largest gains.
- Livestock receipts are expected to increase $4.3 billion in 2011, led by rising cash receipts for cattle and calves.
- Total expenses are forecast to increase by $20.2 billion, exceeding $300 billion for the first time.
- Total production expenses in 2011 are forecast to be 7% higher, accelerating from the estimated 2.2-percent increase in 2010.
- Government payments are forecast to be $10.6 billion in 2011, a 12.7-percent decrease from 2010.
Farm Business Assets
Farm sector assets are expected to rise by 6.1% in 2011, influenced mainly by a projected 6.3% increase in farm real estate assets. Other important factors contributing to higher values for farm sector assets include projected increases in machinery and equipment values (up 4.3%), the value of crop inventories (up 20.0%), and financial assets (up 5.4%).
On farmland values, ERS noted they should "continue to rise given the strength of returns to farm assets, accommodating interest rates, expectations of continued favorable net returns (profit margins) on investments, growth in agricultural exports and strong returns both from the market and from government programs."
Farm Business Debt
Farm sector debt is estimated to increase from $240.3 billion in 2010 to $241.6 billion in 2011. The real estate debt component is forecast to fall by 0.6% from $132 billion in 2010 to $131.5 billion in 2011. The nonreal estate component is forecast to rise by 2.0% from $108.0 billion in 2010 to $110.1 billion in 2011.
Farm Business Equity (Net Worth)
The value of the farm sector's equity (net worth) is forecast to rise from $1.88 trillion in 2010 to $2.01 trillion in 2011. The estimated increase in farm sector equity is largely due to an estimated 6.3-percent increase in the value of farm business real estate.
Farm Business Solvency Ratios
The farm business sector's debt-to-asset ratio is expected to decline from 11.3% in 2010 to 10.7% in 2011, and the debt-to-equity ratio is expected to decline from 12.8% in 2010 to 12.0% in 2011.
Here's a link to read more about USDA's latest update.