U.S. Farm Income Down For 2006
USDA recently released its annual Ag Income and Finance Outlook Report from the Economic Research Service (ERS). According to the ERS report, total U.S. net farm income for 2006 is expected to be $58.9 billion, which is down approximately 20% from the 2005 net farm income level of $73.8 billion. However, the 2006 U.S. net farm income level is still slightly above the 10-year average annual U.S. net farm income of $57.2 billion. The rather significant decline in net farm income from 2005 to 2006 may be rather surprising to some, given the rapid rise in grain prices in recent months. However, in 2006 there has been a drop in the value of livestock production, a significant decrease in government farm program payments and an increase in farm input costs.
Some other highlights from the USDA ERS Report:
-The overall value of production agriculture to the U.S. economy is estimated at $279.5 billion for 2006, which is up $4.1 billion from 2005 and is well above the 10-year average of $237 billion.
-Nationwide, the value of crop production and the value of livestock production contribute about equally to the net value that production agriculture has to the overall U.S. economy.
-The total value derived from crop production in 2006 is expected to increase for 2006 due to higher grain commodity prices and strong sales for fruits and vegetables; while the total value derived from livestock production is expected to decline slightly in 2006, mainly due to lower milk prices than in 2005.
-The total government farm program payments received by farm operators in 2006 is estimated at $16.5 billion, which is down significantly from $24.3 billion in government farm program payments in 2005; and the 2006 figure is about 4% below the five-year average for government farm program payments. Only $5.2 billion of the 2006 government farm program payments are for the guaranteed direct payments under the current Farm Bill.
-Total U.S. farm production expenses for 2006 are expected to be an estimated $237.3 billion, which is an increase of 5% above 2005 farm production expenses, and represents an increase of 22.7%, or $43.8 billion, in the last four years.
-Farm sector equity, assets compared to liabilities, is expected to increase by about 7% in 2006, as compared to a year earlier, mainly due to increases in the value of farmland.
-Average U.S. farm household income, which is a combination of both farm and non-farm income, is expected to be $80,703 for 2006, which is a decrease of 0.9% from 2005. In the past 10 years, average annual household income of farm families has been about 15% higher than the average household income for all U.S. families; however, the household income for farm families is much more variable from year-to-year, and in different locations, than the typical U.S. household income.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN.
You can contact him at 507-726-2137 or via e-mail at [email protected]