High crop prices and crop insurance payouts will drive U.S. net farm income to over $122 billion for 2012, according to a new report from USDA’s Economic Research Service (ERS). Income from livestock also will post a year-to-year increase, tempered by dramatically higher input costs.
The report, updated on August 28, projects higher receipts for cattle and calves through 2012, based on higher prices for all classes of cattle. The authors note, however, that beef and veal exports are expected to decline during 2012, largely due to strengthening of the U.S. dollar relative to international currencies.
Input prices, as producers know, have risen dramatically. The prices-paid index for Production Items, Interest, Taxes, and Wage rates (PITW), a measure of total expenses, has risen 82 percent since 2002 according to the report. During the same period, the Producer Price Index for Finished Goods rose 40 percent. Through July of this year, PITW prices-paid index had risen by 5.4 percent.
Other key points in the report include:
- Drought will reduce corn and soybean supplies to their lowest level in nine years, and resulting high prices will drive crop receipts up for calendar year 2012.
- Farm equity is expected to increase to an all-time high of almost $2.3 trillion.
- Dairy supplies exceed demand, leading to depressed dairy prices for 2012.
- The major crop-related expenses are predicted to rise $5 billion, or nine percent, much less than in 2011. The index for fertilizer prices will rise just 3.5 percent this year, compared with 30 percent in 2011. The index for fuel prices will rise just 2.5 percent this year, after increasing by 223 percent between 2003 and 2011.
- Median total farm household income increased by 5.4 percent in 2011, to $57,067, and is expected to increase another 1.2 percent in 2012, to $57,762. Households that operate commercial farms, deriving most of their income from farming, saw a 7.9 percent increase in income from farming in 2011, to an median income of $84.697.
- Government direct payments to producers are expected to total $11.1 billion in 2012, a 6.3-percent increase over the 2011 program payments.
View a summary or the full report from USDA/ERS.