USDA FARM INCOME OUTLOOK
USDA has released its initial outlook for projected farm income in 2004, and it shows a projected decline in farm income of $7.3 billion dollars from 2003. The 2004 net farm income is projected at $47.6 billion, while USDA projected 2003 farm income at $55.9 billion. The projected reduction in farm income may seem a little strange to crop producers, as we are dealing with some of the best cash grain prices we’ve seen in recent years.
The USDA projections actually showed an increase of $7.7 billion in the overall value of crop production from 2003 to 2004, reflecting the stronger grain market prices. The total projected crop income for 2004 is $116 billion, which was as low as $93 billion as recently as 2001. USDA is projecting a reduction of about $7 billion in government farm payments for 2004, compared to 2003. Only the direct payments are guaranteed in the DCP Farm Program. The counter-cyclical and loan deficiency payments are totally driven by cash grain markets, and are only paid out when grain markets are much lower than current levels.
USDA is projecting a big reduction in farm income for 2004 in the livestock sector. It projects a reduction of $4.9 billion in 2004 livestock income, compared to 2003. This reflects the beef price reductions following the BSE incident in December, continued marginal prices for hogs, and increased feed costs. USDA is also projecting farm operating expenses to increase by about $3 billion from 2003 to 2004. The main reasons are significant increases in fuel, fertilizer and land costs.
CCP PAYMENT UPDATE
USDA is now projecting no counter-cyclical payments (CCPs) for 2003 corn, soybeans or wheat. This means that no advance counter-cyclical payments will be made in February to farm operators enrolled in the DCP Farm Program, as is allowable according to the legislation. Current market prices are too high to project any CCPs for the year. Following is the summary for each crop in 2003:
In February, USDA increased the projected season average corn price, from September 1, 2003, through August 31, 2004, to $2.45 per bushel, which is up 15¢ per bushel from the January estimate. CCP’s are earned when the national average corn price drops below $2.32 per bushel. Back in October, 2003, USDA projected a CCP for corn of 22¢ per bushel, and made an advance CCP payment of 7.7¢ per bushel. If the current strong corn prices hold up through August 31, 2003, corn producers will need to repay the 7.7¢ per bushel CCP payment that was already paid.
The projected USDA season average price in mid-February was $7.25 per bushel, which is unchanged from the January estimate. The result would be no CCP for 2003 soybeans. No advance CCP has been made for soybeans.
The USDA projected average price is $3.35 per bushel, which would result in no CCP for 2003. In October, 2003, USDA projected a CCP of 9 cents per bushel for wheat in October, 2003. A National average wheat price of $3.34 per bushel is the threshold to earn CCP payments. The marketing year for 2003 wheat is from June 1, 2003 through May 31, 2004.
Editors 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].