According to USDA's Economic Research Service (ERS), national net
farm income-a key indicator of U.S. farm well-being-is forecast at
a record $122.2 billion in 2012, up 3.7% from last year's record.
Record gross revenues from crop sales (forecast at $222.1 billion),
coupled with record revenues (forecast at $34.1 billion) from
farm-related income-a category that includes crop insurance
indemnity payments as well as income from custom work, machine
hire, etc.-pushed total gross cash income to a record $433.6
billion (up 5.5%). This more than offset flat revenues from
livestock markets ($165.8 billion), and a 6.6% increase in input
costs (forecast at $294.2 billion) to account for the record
forecast for overall net returns. When measured in cash terms, net
cash income in 2012 is also projected record large at $139.3
billion, up 3.4% from last year's record. However, when adjusted
for inflation, current farm income forecasts remain well below the
peak period of the early 1970s. In addition to record farm income,
farm wealth is also at record levels. Farm asset values-which
reflect farm investors' and lenders' expectations about long-term
profitability of farm-sector investments-are expected to rise
nearly 7% in 2012 to a record $2,551 billion for a fifth
consecutive year of gains. Farm land cash markets have continued to
see gains related to strong crop prices in 2012. Since 2008, farm
asset values are up 26% while farm debt has risen by only 8%. As a
result, the farm debt-to-asset ratio has declined steadily since
2008 and is expected to fall to the lowest level on record in 2012
at 10.2%. The 2012 outlook for a second year of strong farm income
occurs in spite of slow growth in the domestic economy and the most
severe and extensive drought in at least 25 years. The ongoing
drought is expected to destroy or damage a significant portion of
the U.S. corn and soybean crops, with deleterious impacts on all
U.S. livestock sectors-cattle, hogs, poultry, and dairy-and with
the potential to affect food prices at the retail level. Yet,
drought-induced large increases in the value of this year's crops,
plus substantial crop insurance indemnity payments, are expected to
more than offset rising production expenditures for both crop and
livestock activities and generate record farm income. Government
farm payments, at $11 billion (up 6%), are expected to remain
relatively small in 2012 (second-lowest total since 1997) as high
commodity prices shut off payments under the price-contingent
marketing loan and counter-cyclical payment programs. These data
suggest a strong financial position in 2012 for the agricultural
sector as a whole relative to the rest of the U.S. economy, but
with substantial regional variation. In general, the increase in
expenses will affect livestock producers more harshly than crop
producers. Cash grain farmers in the Corn Belt and Northern Plains
are expected to experience a second year of record revenues despite
the drought. In contrast, livestock and poultry feeders are
experiencing record high feed costs that have narrowed or
eliminated profit margins despite record high wholesale and retail
prices for their end products. In addition, the severe nationwide
drought has limited grazing opportunities and hay production for
cattle ranchers in the affected regions and led to substantial herd
liquidation. The lingering effects of the drought are expected to
spill over into next year, when record-high market prices will
likely motivate large feed grain and oilseed plantings. Eventual
2013 agricultural economic well-being will hinge greatly on spring
crop planting and summer growing weather, as well as both domestic
and international macroeconomic factors including economic growth
and consumer demand.
General
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