USDA’s Economic Research Service released its 2012 farm income estimates, which project U.S. net farm income will total $122.2 billion in 2012 – up 3.4% from last year – and net cash income, $139 billion, both record nominal values. Inflation-adjusted net farm income is the second highest since 1970. The expected increase in income reflects large price-led gains in corn and soybean receipts in addition to crop insurance indemnities. Crop farm gains should be more than enough to offset livestock farmers' higher feed expenses and a decline in milk sales, the economists say.
Farm equity is expected to increase to an all-time high of almost $2.3 trillion as farm asset growth exceeds increases in farm debt. Rising values of farm real estate and financial assets more than offset an anticipated increase in non-real estate debt. Debt repayment capacity utilization – a measure of farm exposure to financial risk – is forecast to be at its lowest since 1970.
Crop receipts are leading the 2012 income increase, with strong gains in corn, soybean, hay, and wheat sales. Farmers will sell 4% more wheat at a higher annual price ($8/bu.) in 2012 as production recovers from the 2011 drought and feed demand increases. Corn production, exports and use of corn for ethanol all will decline, but while the quantity of corn for grain sold in 2012 is expected to drop almost 7.4%, a forecast price increase of $1.31/bu. should boost annual receipts. USDA expects the lowest soybean supply in nine years, while receipts should log a significant increase as a $3/bu. boost in price more than offsets an 8% decline in the quantity sold.
Receipts for both cattle and calves are forecast to increase in 2012, reflecting significant price increases for both. Hog receipts are forecast to decline on lower prices despite more export of pork and broilers.
Following a $9.2-billion (20%) jump in 2011, feed expenses are expected to rise another $7.2 billion (13%) in 2012, based on a 12.4% increase in the feed prices-paid index and a slight increase in livestock output. The number of grain-consuming animal units is expected to increase marginally, but net placements of cattle on feed should be down 3.4%. The economists say rising feed costs have been the primary cause of the 12% drop in the price of Oklahoma City feeder steers from January through July.
This income news may shock city dwellers who have seen nothing but tales of woe related to the drought for months now. It also may color legislators’ views about the urgency of a farm bill when the return to Washington.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.