October 2013
Farm & Field

Farm Income Forecast Reduced by Larger Than Expected Harvests

 

United States farmers will receive $120.6 billion in net income this year, up 6 percent from last year, according to USDA’s latest forecast.

After adjusting for inflation, the income figure is the second-highest amount since 1973 with only 2011’s inflation-adjusted income being higher.

However, the number is down from USDA’s estimate earlier this year, reflecting larger harvests that will mean lower prices and reduce projected farm income.

The net income forecast "is a testament to the resilience and productivity of U.S. farmers and ranchers and a further sign of the positive momentum they have achieved over the past 5 years," said Agriculture Secretary Tom Vilsack.

According to USDA, net cash income is expected to decline by more than 10 percent from 2012. Unlike net farm income, the net cash figure does not account for capital consumption, change in inventories and non-money income.

Substantial year-end crop inventories that lift the 2013 net farm income forecast are not reflected in net cash income.

Other highlights in the forecast include:

 
   

The value of livestock, dairy and poultry production is expected to increase 5.2 percent in 2013, reflecting large gains in broiler and milk sales. The average annual price for broilers is expected to rise almost 11 cents per pound in 2013 while milk receipts are projected to exceed the previous high set in 2011. The annual price of milk is expected to be $19.70 per cwt., $1 higher than 2012 and the second highest on record. Milk production should be about 1 percent above last year. Other livestock categories are forecast to change only slightly from 2012.

Cotton receipts (lint and seed) are expected to decline in 2013 from their record 2012 level, reflecting large declines in both the supply of and demand for cotton. A decline in cottonseed receipts will be mostly offset by an expected rise in open-market sales of lint. U.S. cotton sales are especially dependent on world demand for U.S. output, and that demand has been dropping sharply and reducing exports.

The value of crop production (the sum of cash receipts, value of inventory adjustment and home consumption) is expected to rise in 2013 despite an anticipated $12.4-billion drop in 2013 crop cash receipts. The USDA explains this is due to a very large 2012-13 increase predicted in the value of inventory adjustment for crops, led by corn and soybeans. The increases in end-of-2013 inventories for both commodities more than offset the negative impact of lower expected prices.

Lower corn receipts reflect an expected fall in 2013’s average price from its record high in 2012. The forecast price decline more than offsets the anticipated increase in quantities sold in 2013 with that number expected to be the third highest on record.

 
   

While both U.S. soybean production and use are predicted to increase in marketing-year 2013, expectations for lower soybean receipts reflect lower prices that will more than offset a slight gain in quantities sold.

Value of peanut production is expected to drop 38 percent in 2013, reflecting both lower prices and quantities sold.

Food grain receipts should remain relatively stable. A forecast decline in the price of wheat in 2013 will be mostly offset by an increase in quantity sold. Rice receipts are expected to remain stable due to higher prices and lower sales.

Vegetable and melon receipts are expected to be up 17 percent in 2013, mainly due to higher prices, except for dry beans. While sales of dry beans should increase, a forecast price decline will mean lower dry bean receipts.

Large production gains are expected for peaches, prunes and plums in 2013 with more modest increases expected for apples, pears, strawberries, grapefruit and lemons. Large declines are forecast in avocado and sweet cherry production with smaller but still substantial declines in orange and almond output.

The projected increase of $13.1 billion, or 3.8 percent, in total farm production expenses in 2013 continues a string of recent annual increases interrupted only in 2009. In total, expenses are expected to reach another nominal record high of $354.2 billion. In inflation-adjusted dollars, 2013 production expenses are also a record. However, the anticipated rise this year is less than half of the $28.5-billion rise in 2012. A steady increase in prices, rather than higher quantities of inputs, has been the biggest factor in rising production expenses since 2003.