USDA: Net Farm Income Forecast Up 20%
Net farm income is forecast to be $94.7 billion in 2011, up $15.7 billion (19.8%) from the 2010 forecast, despite a $20 billion jump in production expenses, USDA reports. The 2011 forecast is the second highest inflation-adjusted value for net farm income recorded in the past 35 years. Cash receipts are expected to increase 9.1%, with cotton, soybean, wheat and corn receipts showing the largest gains.
The value of the farm sector’s equity is forecast to rise 6.8% in 2011. The estimated increase in farm sector equity is largely due to an estimated 6.3% increase in the value of farm business real estate. Farm asset values are expected to have the largest percentage increase since 2007. With modest increases in debt, inflation-adjusted equity should exceed 2007’s peak levels.
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 is expected to decline from 12.8% in 2010 to 12.0% in 2011. This indicates that the farm sector’s solvency position remains strong.
“Today’s report predicting strong financial performance in the agriculture sector for 2011 is good news for producers and indicates that economic improvement is underway in much of rural America. Potential record or near record prices for commodities like corn, wheat, soybeans and cotton reflects the fact that our trading partners continue a strong demand for food and fiber produced by America’s farmers,” said USDA Ag Secretary Tom Vilsack. “While overall the report is positive, especially for producers of grains and fiber, it is a concern that farmers continue to face an increase in expenses for key inputs, including feed, fertilizer and fuel. Additionally, after a strong recovery in 2010, the report projects a revenue decline for livestock farm businesses in 2011 and continued income and loan repayment concerns for dairy farmers. Higher feed costs are a primary factor.”
In 2011, average family farm household income is forecast to be up 4.0% over 2010 to $86,352. Both farm and off-farm income are forecast to be up in 2010 and 2011, compared to the previous years and compared to the five-year average for 2005-09. In 2011, 12.9% of the income of farm families is expected to be from farm sources, with the rest from off-farm income. Farm income is forecast to average $11,174 in 2011. Average off-farm income is forecast to be $75,178.
After falling $12.0 billion (4.1%) in 2009 and rebounding a relatively modest $6.5 billion (2.3%) in 2010, total production expenses on U.S. farms are set to jump $20.2 billion (7.0%) in 2011 to a nominal record $307.5 billion. The 2011 jump resembles the large increases in production expenses in 2007 and 2008. This is the first time that expenses will have exceeded $300 billion. Despite crossing this threshold, 2011 inflation-adjusted expenses still remain below the levels reached in 1979 and 1980. Every expense except livestock and poultry purchases is forecast to increase in 2011. ◆