Tuesday, August 30, 2011
Farm Income Is Up In 2011, But Is That A Surprise?
Tuesday, August 30 recorded probably the largest attendance ever at a Farm Progress Show, and there is certainly good reason for that. That is because USDA reported Tuesday that net farm income will be up 31% in 2011. It made good sense to investigate technology that will increase profitability and efficiency by heading to the Farm Progress Show.
USDA’s Economics Research Service forecasts 2011 net farm income at $103.6 billion, which is up $24.5 billion from last year, or a 31% rise. For the first time, both net farm income and net cash income will exceed $100 billion. The ERS report projects crop receipts will increase by $33.6 billion over 2010.
While the quantity of corn sold in 2011 is expected to decline less than 5%, this will be more than offset by an almost $2-per-bushel increase in price. Corn exports are suffering as rising U.S. corn prices have made feed-quality wheat, a substitute, more competitive.
Livestock receipts are expected to increase $22.4 billion in 2011, led by rising cash receipts for dairy, meat animals, and turkeys. Large anticipated price increases in 2011 are expected to generate strong sales for U.S. livestock. Dairy receipts are expected to increase as milk prices received by farmers increase over $4/cwt. Large sales increases are anticipated for all three categories of meat animals, and to a lesser extent for turkeys.
While the profit margin shows a $106 billion margin, expenses continued upward along with gross receipts. USDA says expenses will increase by more than 11% or $32.5 billion, and the cost of inputs for both crops and livestock will exceed $300 billion for the first time ever.
Every expense category is forecast to increase in 2011. Feed is expected to rise $9.2 billion; livestock and poultry purchases, $2.4 billion; fertilizer and lime, $5.1 billion; and fuels and oils, $3.2 billion. Seeds, miscellaneous expenses, total interest expenses, repair and maintenance, and net rent to non-operators should each be up more than $1 billion.
In 2011, payments to stakeholders are forecast to be up 5.1 percent ($2.6 billion), a much smaller percentage increase than net farm income. They are expected to constitute 17 percent of total production expenses (1 percent less than in 2010) and 33 percent of net value added (6.5 percent less than in 2010). All three components—hired labor, net rent to non-operators, and interest expenses—are set to increase.
So with increased profits, will that be a positive factor in raising net worth? Yes, says the ERS economists. The value of equity or net worth will rise 7.7% in 2011. That is a function of land prices say the USDA economists, since land has increased in value by 7.1% at the same time. Simultaneously, the amount of farm debt has dropped nearly 2%. The current debt to asset ratio of 10.4% would match the historical low of 11.6% in 2007.
Consequently, farm household income went up as well. ERS economists report, “Median total farm household income is expected to increase by 1.9 percent in 2011, to $55,405. Most farm households earn the majority of their income from off-farm sources and off-farm income is expected to increase by 3.0% in 2011, to 51,889. In 2010, median total farm household income was $54,370, up 4.1% from 2009 and 1.2% above the 5-year average for 2006-10. Median farm and off-farm income was $-2,020 and $50,385, respectively, both higher than in 2009.”
Summary:
Net farm income will be more than $100 billion, up by more than $32 billion with the help of higher receipts from both grain and livestock markets. Farm expenses will be higher, and will exceed $300 billion for the first time ever. Both quantity and costs increases for inputs.
Posted by Stu Ellis on 08/30 at 11:59 PM | Permalink