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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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Congressional Research Service (CRS)

 

U.S. Farm Income

Randy Schnepf, Specialist in Agricultural Policy

August 30, 2013

http://www.fas.org/sgp/crs/misc/R40152.pdf

[full-text, 34 pages]

 

Summary

According to USDA’s Economic Research Service (ERS), national net farm income—a key

indicator of U.S. farm well-being—is forecast at a record $121 billion in 2013, up 6% from last

year, and about $3 billion above 2011’s previous record.

 

In addition to record net farm income, farm wealth is also at record levels. Farm asset values—

which reflect farm investors’ and lenders’ expectations about long-term profitability of farmsector

investments—are expected to rise nearly 7% in 2013 to a record $3,101 billion for a fifth

consecutive year of gains. Farm land cash markets have continued to see gains related to strong

crop prices in 2013. Since 2008, farm asset values are up 49% while farm debt has risen by only

28%. As a result, the farm debt-to-asset ratio has declined steadily since 2008 and is expected to

fall to 10.2%, its lowest level since 1960.

 

The 2013 outlook for a third year of strong farm income occurs in spite of slow growth in the

domestic economy and the lingering effects of the 2012 drought—the most severe and extensive

drought in at least 25 years. The 2012 drought destroyed or damaged a significant portion of the

U.S. corn and soybean crops, with deleterious impacts on all U.S. livestock sectors—cattle, hogs,

poultry, and dairy—as feed costs reached record levels. The drought’s eventual effect on food

prices at the retail level continues to be felt in 2013.

 

In general, a return to trend yields in 2013 (assuming normal weather) is expected to generate

record-large harvests of major crops which, in turn, would likely benefit livestock producers in

the second half of the year as crop prices are expected to decline from record-high levels. Cash

grain farmers in the Corn Belt and Northern Plains are expected to experience a third year of

near-record revenues as a return to trend yields would offset a substantial portion of the

anticipated crop price decline. However, the expected increase in crop and total output in 2013 is

also projected to lead to unusually large increases in marketing, storage, and transportation

expenses and miscellaneous expenses.

 

Government farm payments, at about $11 billion, are expected to remain relatively small in 2013

(third-lowest total since 1997) as high commodity prices continue to shut off payments under the

price-contingent marketing loan and counter-cyclical payment programs.

 

These data suggest a strong financial position heading into 2013 for the agricultural sector as a

whole relative to the rest of the U.S. economy, but with substantial regional variation. Eventual

2013 agricultural economic well-being will hinge greatly on the 2013 crop harvests, as well as

both domestic and international macroeconomic factors including economic growth and

consumer demand.

 

Contents

Introduction ...................................................................................................................................... 1

Highlights of 2013 Farm Income Forecast ...................................................................................... 2

Outlook for U.S. Agriculture for 2013 ...................................................................................... 4

Recap of U.S. Agriculture in 2012 ............................................................................................ 5

Cash Receipt Highlights .......................................................................................................... 12

Crop Highlights ................................................................................................................. 12

Livestock Highlights ......................................................................................................... 13

Government Payment Highlights ...................................................................................... 14

Production Expense Highlights ............................................................................................... 16

Agricultural Trade Outlook ..................................................................................................... 17

Farm Asset Values and Debt .......................................................................................................... 19

Average Farm Household Income ................................................................................................. 21

On-Farm vs. Off-Farm Income Shares .................................................................................... 21

U.S. vs. Farm Household Income ............................................................................................ 21

Farm Household Income by Sales Class ................................................................................. 23

 

Figures

Figure 1. Annual U.S. Farm Sector Nominal Income, 1960 to 2013F ............................................. 3

Figure 2. Annual U.S. Farm Sector Inflation-Adjusted Income, 1960 to 2013F ............................. 3

Figure 3. U.S. Farm Gross Revenue, Production Expenses, and Net Income ................................. 4

Figure 4. Drought Conditions Reappear for Plains States and Western Corn Belt .......................... 5

Figure 5. Widespread Drought Damaged 2012 Crop Output........................................................... 6

Figure 6. U.S. Corn Stocks (as Share of Use) to Grow in 2013/2014, While Prices Fall ................ 7

Figure 7. U.S. Soybean Stocks (as Share of Use) Remain Near Historic Lows .............................. 7

Figure 8. Monthly Farm Prices for Corn, Soybeans, and Wheat, Nominal Dollars ........................ 8

Figure 9. Monthly Farm Prices for Corn, Soybeans, and Wheat, Indexed Dollars ......................... 8

Figure 10. Monthly Farm Prices for Cotton and Rice, Nominal Dollars ......................................... 9

Figure 11. Monthly Farm Prices for Cotton and Rice, Indexed Dollars .......................................... 9

Figure 12. Monthly Farm Prices for Cattle and Milk, Nominal Dollars ........................................ 10

Figure 13. Monthly Farm Prices for Cattle and Milk, Indexed Dollars ......................................... 10

Figure 14. Monthly Farm Prices for Hogs and Broilers, Nominal Dollars .................................... 11

Figure 15. Monthly Farm Prices for Hogs and Broilers, Indexed Dollars ..................................... 11

Figure 16. Farm Cash Receipts by Source, 1990 to 2013F ........................................................... 12

Figure 17. Crop Cash Receipts by Source, 2007 to 2013F ............................................................ 13

Figure 18. U.S. Livestock Product Cash Receipts by Source, 2007 to 2013F ............................... 14

Figure 19. U.S. Government Farm Support, Direct Outlays, 1997 to 2013F ................................ 15

Figure 20. Farm Cash Production Expenses by Source, 2007 to 2013F ........................................ 17

Figure 21. U.S. Agricultural Trade Since 1970 .............................................................................. 18

Figure 22. U.S. Agricultural Trade: Bulk vs. High-Value Shares .................................................. 18

Figure 23. U.S. Agricultural Export Value as Share of Gross Cash Income .................................. 19

Figure 24. U.S. Average Farm Land Values, 1985 to 2013F ......................................................... 20

Figure 25. U.S. Farm Debt-to-Asset Ratio Since 1960 .................................................................. 21

Figure 26. U.S. Average Farm Household Income, On- and Off-Farm Sources, Since 1960 ........................... 22

Figure 27. Comparison of Farm to U.S. Average Household Income Since 1960 ........................ 22

Figure 28. Ratio of Farm to U.S. Average Household Income Since 1960 ................................... 23

 

Tables

Table 1. Distribution of Farms and Value of Production by Gross Farm Sales, 2011 ................... 24

Table 2. U.S. Crop and Livestock Revenue by Source, 2008-2013F ............................................ 25

Table 3. U.S. Farm Production Expenses by Source, 2008-2013F ................................................ 26

Table 4. Annual U.S. Farm Income Since 2006 ............................................................................. 27

Table 5. Average Annual Income per U.S. Household, Farm versus All, 2006-2013F .................. 28

Table 6. Average Annual Farm Sector Debt-to-Asset Ratio, 2006-2013F ..................................... 28

Table 7. U.S. Prices and Support Rates for Selected Farm Commodities Since 2008/09 Marketing Year ..................... 29

 

Contacts

Author Contact Information........................................................................................................... 30

 

 

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