USDA Releases Net Farm Income Forecast for 2013

Net farm income is forecast to be $128.2 billion in 2013, up nearly 14% from 2012’s revised forecast of $112.8 billion, according to a release Monday from USDA’s Economic Research Service. After adjusting for inflation, 2013’s net farm income is expected to be the highest since 1973. Net cash income is forecast at $123.5 billion, down almost 9% from 2012 (see table on farm income indicators ). Not all crops produced in 2013 will be sold by the end of the 2013 calendar year; we anticipate substantial increases in the annual quantity and value of crop inventories, particularly for corn. As a result, crop cash receipts are expected to decline in 2013. The small projected increase in livestock receipts is not sufficient to offset increasing expenses. Nevertheless, after adjusting for inflation, net cash income is expected to remain high by historical standards.

 
 
 

Highlights

  • Net farm income is forecast to increase 13.6% to $128.2 billion in 2013, which would be the highest inflation-adjusted amount since 1973. A return to trend yields would lead to record crop production levels and result in substantial year-end crop inventories and higher net farm income forecast for 2013.
  • Net cash income is forecast to decline by nearly 9% from 2012. Unlike net farm income, net cash income does not account for capital consumption, change in inventories and non-money income.
  • The projected $19.2-billion increase in total expenses in 2013 continues a string of large year-to-year movements that have taken place since 2002. In both nominal and inflation-adjusted dollars, 2013 production expenses, at $353 billion, are expected to be the highest on record.
  • The value of livestock production is expected to increase 3.5% in 2013, with receipts increasing nearly 3%. The projected gains result mostly from expectations of price increases.
  • The value of crop production is expected to rise 11% in 2013, despite a predicted decline in crop receipts. The difference indicates the significant role of crop inventories. Crop receipts are forecast to decline by $3.2 billion in 2013, which would be the first decline since 2009.
  • Increases in farm asset values are expected to continue to exceed increases in farm debt, leading to expectations of another new record high for farm equity.
  • Farm financial risk indicators are expected to continue at historically low levels.

See the official USDA estimates and forecast tables in the Farm Income and Wealth Statisticsdata product.

Most figures in this article are in nominal dollars. Estimates and forecasts in constant (2005=100) dollars are available .

Value of Corn Production Expected to Reach All-Time High in 2013

The value of feedgrain and oil crop production--which reflects cash receipts, home consumption, and the annual value of inventory change--is expected to rise in 2013 as large, anticipated production increases more than offset expected price declines.

See tables on U.S. farm sector crop cash receipts and value of production and U.S. annual average price for selected crops and livestock . This forecast assumes a return to trend in crop yields and production following drought-induced production declines in 2012.

For corn, a large anticipated increase over 2012 production levels, coupled with high prices, is expected to result in a record-setting value of U.S. corn production ($81.7 billion) in 2013 as U.S. farmers recover from the drought. Corn inventory is forecast to grow significantly in 2013 as well. See table on quantity and value of annual inventory change for selected crops and livestock . Increases in the value of production are also expected for the other major feed crops, especially hay. The value of U.S. soybean production is expected to increase in 2013, but quantity sold during the year is expected to decline, with more production expected to go into 2013 end-of-year inventories. Given a large expected decline in the annual average price of soybeans, and an increase in inventories, cash receipts for 2013 are expected to decline just over 10%.

An increase in the annual price for wheat is expected in 2013, but an anticipated decrease in the quantity of 2013 wheat sold and a decline in the value of annual end-of-year wheat inventories are expected to reduce cash receipts (down 2%) and value of production (down 4%) for wheat in 2013. Cotton (lint and seed) receipts and value of production are forecast to continue to decline 24 and 28 percent, respectively, in 2013. The annual cotton lint price is forecast to decline for the second year in a row. Forecasts are for declines in cottonseed price and quantity sold.

 

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Value of Livestock Production Forecast Up in 2013

The value of livestock, dairy, and poultry production is expected to increase 3.5% in 2013, with broilers, cattle/calves, and dairy leading the way. See table on U.S. farm sector livestock cash receipts and value of production . Almost all categories should benefit from expected increases in annual average prices. See table on U.S. annual average price for selected crops and livestock . Declines in inventory during 2013 mean cash receipts in 2013 should be slightly higher than the value of production for cattle/calves and hogs. See table on quantity and value of annual inventory change for selected crops and livestock . Slight declines in the value of production are forecast for turkeys and chicken eggs, both of which are expected to experience small price declines.

Beef sales are forecast down in 2013, while the annual cattle price is forecast to increase from 2012. Several years of cattle herd liquidation, recently exacerbated by drought conditions, have reduced the supply of cattle. Herd expansion will eventually result in an expansion of beef production. However, due to biological lags in the beef production cycle, the initial stages of an expansion cause tighter supplies of feeder and finished cattle. Beef per capita disappearance is expected to decline as are exports of beef and veal.

The annual price of hogs is expected to increase in 2013 and with an increase in pork sales, cash receipts and value of production are predicted to rise. Declining pork exports reflect lower shipments to China and Japan (as the yen depreciates).

 

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Farm Production Expenses Forecast Record High in 2013

The projected $19.2-billion increase in total expenses in 2013 continues a string of large year-to-year movements since 2002, and expenses are forecast to reach another record-high, at $352.9 billion (see table on production expenses ). Since 2003, nominal total production expenses will have risen by over $155 billion (79%  if forecasts are realized. In inflation-adjusted dollars, 2013 production expenses are expected to surpass the previous peak reached in 1979.

 
 
 

Since 2003, farm-origin expenses and manufactured inputs have increased 106 percent, while other operating and overhead expenses increased 60 percent. Farm-origin expenses and manufactured inputs now constitute 49 percent of total production expenses, up from 42 percent in 2003. In contrast with recent trends, these expenses are set to rise less than other operating and overhead expenses in 2013.

 
 
 

A return to trend yields in 2013 will cause a substantial increase in crop and total output in 2013, which is expected to cause unusually large increases in marketing, storage, and transportation expenses and miscellaneous expenses. The latter expense will also be hiked by an expansion in crop insurance premiums, particularly net Federal Crop Insurance Corporation premiums.

 
 
 
 

Government Payments Forecast To Remain Steady in 2013

Government payments paid directly to producers are expected to total $10.9 billion in 2013 under current law, as applied by USDA’s program agencies (see table on government payments ). This payment level is largely unchanged from 2012. Direct payments under the 2013-crop Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $4.94 billion for 2013. Strong crop prices in 2013 are expected to result in only about $15 million in price-based commodity program payments. These payments reflect final 2011-crop ACRE payments for rice and 2012-crop ACRE payments for other commodities.

 

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labor expense increased $271 million (1.0 percent) between November 2012 and February 2013 because the wage rate PPI rose nearly that much.