| On August 6, 2009, ERS released the first estimate
of national and State farm sector accounts for 2008
and updates to 2007 and earlier estimates. The updates
incorporate revisions by the National Agricultural
Statistics Service (NASS) to several key reports used
in the ERS farm income accounts. The revisions stem
from a comprehensive review of previously published
data in light of information from the 2007 Census
of Agriculture. See more on this
revision. |
Net Farm Income Estimated at $87.1
Billion in 2008
Net farm income was an
estimated $87.1 billion in 2008, up from the $70.9 billion
farmers are estimated to have earned in 2007. That is
a year-to-year gain of $16.2 billion (22.8 percent) and
places 2008 net farm income 46 percent above the 10-year
average of $59.6 billion.
2008 was a particularly good year for corn and soybean
producers. Prices for the two commodities were at levels
not seen in recent years due to heightened demand for
use in the production of ethanol and biofuel. The higher
prices for these two key ingredients of processed food
and animal feed resulted in higher prices for other crops
as buyers searched for alternatives.
Net cash income was an
estimated $97.5 billion, $19.5 billion (24.5 percent)
above 2007 and 44 percent above its 10-year average of
$67.6 billion. Net cash income rose more than net farm
income because farmers cashed in some of their inventories
of commodities carried from the prior year. Farmers sold
some $681 million of crops carried over from 2007 and
trimmed livestock herds by $1.69 billion in the face of
rising feed costs.
The value of production in the livestock sector rose
by an estimated $19 billion in 2007, led by dairy (up
$12 billion) and poultry ($6.5 billion). Despite the higher
feed costs, the total value of livestock production rose
another $1.2 billion in 2008 due to a $3.65 billion increase
in sales of poultry and poultry products which more than
offset small declines in the other livestock sectors.
See our glossary for
definitions of terms.
See the official
USDA estimates and forecast tables.
d
The farm income story for 2008 reflects two opposing
trends: a large increase in the value of crop production,
partially offset by rising costs of production. The value
of crop production, at $182.5
billion, exceeded its previous record (set in 2007) by
$31.6 billion, a 20.9-percent increase. Prices of major
crops (corn, soybeans, wheat) were trending upward in
late 2007 and continued doing so in the first part of
2008 as the remainder of the 2007 harvest was marketed.
These prices declined in the later months of 2008, but
remained high by historical standards.
d
d
The values of livestock production and livestock cash
receipts increased only slightly in 2008, but that
followed a $20 billion increase in livestock cash receipts
in 2007. Cattle and dairy underwent small declines but
were more than offset by increases of $1 billion in hog
receipts and $3.6 billion in poultry sales. Cattle receipts
have remained relatively constant ($47 billion to $49
billion) over the last 5 years, but sales of dairy products
and poultry have risen significantly over that time period.
Receipts for cattle and calves comprised 43 percent of
the value of livestock production in 2003 but only 34
percent in 2008.
d
Commodity prices rose in 2007 and ended the year strong
with many key economic indicators at very favorable levels.
Commodity prices were above recent levels in some cases
(wheat, soybeans, corn, milk). Exports were strong as
a weak dollar made U.S. commodities more competitive in
international markets, and ending-year stocks of many
commodities were low.
In the early months of 2008, commodity prices continued
to surge and remained relatively high through the first
half of 2008. Prices dipped in the second half of 2008
as the national and world economies slowed and demand
weakened.
d
See monthly prices for crops
and livestock.
See annual prices for commodities.
Corn production
was a little over 12 billion bushels in 2008—the
second highest on record. Soybean production was 3 billion
bushels and the fourth highest on record despite early-season
flooding in parts of the Midwest. Consequently, with large
harvests to sell at high prices, 2008 proved to be a good
year for the farm economy as a whole, driven by strong
demand for feed crops, oilseeds, and food grains.
d
d
d
Production Expenses Higher in 2008
Production expenses rose
in 2008, led by expenditures for feed, fuel, and fertilizer.
The price of feed crops rose significantly in 2008. Fuel
prices were up significantly as the price of crude oil
spiked at about $150 a barrel before tailing off in the
4th quarter of the year by which time farmers had completed
most of their fuel purchases and use for the year. The
higher prices for petroleum-based fuels increased the
demand for natural gas and propane as producers and consumers
in all sectors of the U.S. economy sought alternative
sources of fuel. Nitrogen comprises a significant share
of expenditures for fertilizer, and nitrogen prices are
heavily influenced by the price of natural gas. With nitrogen
application levels and prices for fertilizer ingredients
both up, fertilizer expenditures increased in 2008.
d
The values of both crop and livestock production have
trended steadily upward since 1970. However, the year-to-year
movements in the two measures have not always been synchronized—in
2008, the rise in the value of crop production was nearly
six times that of livestock.
Feed costs are a large component of livestock expenses,
and the higher prices for feed crops in 2008 reduced profit
margins for livestock producers. Rising costs caused livestock
producers to eliminate their least productive animals
and cut back in less profitable areas of their operations.
Net value added and net farm income have followed the
value of commodity production over both the long term
and in year-to-year fluctuations. Because farmers typically
do not vary their production mix dramatically from year
to year, purchases of production inputs have been relatively
stable. Thus, the direction and magnitude of annual changes
in the value of livestock production have arisen primarily
from market prices for livestock and livestock products.
On the other hand, variability in the value of crop production
is determined by both market prices and production levels.
Crop production varies with changes in yields due to weather,
plant disease, and pests.
Commodity Prices
Boost Farm Income
In general, 2008 proved to be a good income year for
U.S. crop producers, particularly for feed crops, oilseeds,
and food grains. The gain in 2008 U.S. farm income was
primarily the result of commodity prices that exhibited
volatility during the year but remained strong by historic
measures. In the livestock sector, prices for cattle and
milk remained well above their average over the last 10
years. Prices for a number of major commodities—corn,
wheat, soybeans, and milk—rose throughout 2008 and
attained unexpectedly high levels. The higher prices were
principally due to strong demand from the domestic biofuels
industry and from foreign buyers. As a result, farmers
received high prices despite harvests that approached
record levels.
The U.S. dollar has depreciated significantly against
major foreign currencies in recent years. The lower value
of the dollar amounts to greater effective demand for
U.S. exports, boosting farm-level prices to a level that
more than offsets the increase in production costs resulting
from higher prices for imported production inputs, particularly
fuel and fertilizers (nitrogen and potash).
The income earned from farm production, as measured in
net value added, is distributed among stakeholders (rent,
wages, interest) and producers for their contributions
of land, labor, capital, and management acumen. The incomes
earned by stakeholders are agreed upon in advance of their
contribution to the production activity. Consequently,
their earnings are not subject to the vagaries of markets
and production. The lack of variability in their earnings
is in contrast to the sawtooth pattern of net farm income.
Producers absorb the inherent risks of both their own
production and the prices generated by global markets.
As such, they bear the brunt of losses when production
and prices decline and reap the gains when production
and price are above average.
d
Government Payments Were $12.2
Billion in 2008
Direct government payments
were $12.2 billion in 2008, up from the $11.9 billion
paid out in 2007. This level was 25 percent below the
5-year average for 2003-2007. Direct payments under the
Direct and Countercyclical Program (DCP) were $5.11 billion
in 2008, a 1-percent increase from 2007. Direct payment
rates are fixed in legislation and are not affected by
the level of program crop prices. Since 2004, there has
been little change in direct payments by crop year. The
small fluctuations across the calendar years are the result
of changes in the number of farmers receiving optional
advanced payments in December, affecting the share of
the payment rolled into the following calendar year.
d
Countercyclical payments decreased by 37 percent from
$1.1 billion in 2007 to $712 million in 2008. Since 2006,
only upland cotton and peanuts have received countercyclical
payments. Under the Food, Conservation and Energy Act
of 2008 (2008 Farm Act), the timing of countercyclical
payments will change. For the crop years 2008 through
2010, producers will receive two countercyclical payments.
A partial payment will be made after 180 days of the marketing
year and the final payment will be made beginning the
following October 1st.
Marketing loan benefits—including loan deficiency
payments, marketing loan gains, and certificate exchange
gains—were $316 million in 2008, down from $1.14
billion in 2007. In 2008, upland cotton producers realized
93 percent of the total marketing loan benefits. The other
crops receiving marketing loan benefits were wool, mohair,
and pelts. Even though commodity prices had declined from
their peaks in the second half of 2008, commodity prices
in 2008 were still too high to allow the remaining program
crops to participate in these programs.
Tobacco Transition Payment Program (TTPP) payments were
$816 million in 2008, or 9 percent lower than in 2007.
Payments reported here include both CCC payments and lump-sum
payments. Begun in 2005, this program provides payments
over a 10-year period to eligible quota holders and producers
of quota tobacco. Lump-sum payments to individuals are
made through agreements with third parties in return for
their rights to the 10-year TTPP payment stream.
Conservation programs include all those operated by USDA's
Farm Service Agency
(FSA) and the Natural
Resources Conservation Service (NRCS) that provide
direct payments to producers. Estimated conservation payments
of $3.16 billion in 2008 reflect programs being brought
up to funding levels authorized by current legislation.
Ad hoc and emergency program payments valued at $2.12
billion in 2008 include all programs providing disaster
and emergency assistance to farmers. USDA started making
disaster payments in late December 2007 as appropriated
under Title IX – Agricultural Assistance –
of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery,
and Iraq Accountability Appropriations Act, 2007. Most
of the expected $2.8 billion was paid out to farmers in
2008. Section 743 of the Consolidated Appropriations Act,
2008 (enacted December 26, 2007) extended the period of
loss eligibility for disaster assistance from February
28, 2007, to December 31, 2007.
Not All Farmers Share Equally in Income Gains
Because of the diversity of U.S. agriculture, annual
changes in economic fortunes can vary greatly across commodities
and regions. States that are leading producers of corn,
soybeans, and wheat benefited the most in 2008. Their
market prices rose faster and by more than other crops.
Meanwhile, their expenses were roughly equivalent with
other commodities. Thus, the Midwest and Corn Belt were
the big beneficiaries of commodity price trends. Livestock
producers experienced larger increases in production expenses
than crop producers due to their heavy reliance on feed.
Table
Table
Revisions
Related to the Availability of New Data
USDA's National Agricultural Statistics Service
(NASS) is the source of much of the data underlying
the farm income accounts produced by ERS. NASS conducts
periodic surveys (monthly and annually) and releases
the information via publicly available reports and
data products. Reports
are published on an ongoing basis with a schedule
of release dates posted so that data users know
the specific date on which a particular report will
be released. Monthly and annual estimates produced
by NASS as a part of its national and State estimates
program are subject to revision when additional
information becomes available. The Census
of Agriculture, conducted every 5 years, is
one such source that underpins comprehensive review
of previously published estimates. The scope of
census content is such that it provides data to
examine more frequently released data series stretching
from commodity production, disposition, and receipts
to farm numbers, land in farms, and land values.
With release of the 2007 Census in February 2009,
this year has been a review time for NASS published
data series. Altogether, 21 bulletins containing
a wide variety of agricultural data series have
been released, with newly reviewed final estimates
for the time frame extending from 2003 through 2007.
The farm income accounts include data from 18 of
these reports as well as results from the census
itself, particularly as they affect the summarization
of annual surveys. The following are three parts
of the income accounts that were particularly affected
by revisions to previously published data series.
Sales of Forestry Products From Farms
The farm income accounts adhere to a definition
of the farm sector used by the Bureau of Economic
Analysis (BEA), so the farm sector income accounts
only include sales of forestry products from establishments
meeting the definition of a farm. Lacking a published
annual source of data for forestry sales, ERS has
over time collected data from State sources for
this component of the accounts. Frequently, the
estimates of State sales appeared to include sales
exceeding those from farms by varying degrees. The
census of agriculture does ask farmers about their
sales of forestry products. ERS had given the State
sources the benefit of the doubt up to three times
the amount included in the previous census and then
treated the balance as being from nonfarm sources.
Rather than adjust the value obtained from the State
source, which is reported under Revenues from Services
and Forestry, an offset was included under expenses
via the component Net Rent Received by Nonoperator
Landlords, which had the effect of crediting the
income to nonfarm sources. ERS and NASS have agreed
to base the estimate of forestry sales for all States
on the last census, and ERS has made the revisions
in both components back to the year 2000. The revisions
are essentially offsetting and have little effect
on net farm income or net cash income.
Gross Imputed Rent of Dwellings
From the very beginning of the farm income accounts,
net farm income has included a component for the
imputed rent of farm dwellings as the value of the
service rendered by the dwelling. (The two alternative
income measures, net cash income and returns to
operators, do not include this component.) The estimates
of value/acre of land and buildings published by
NASS from the June Agriculture Survey (JAS) and
from the census of agriculture are used by ERS to
develop estimates of the value of farm business
real estate and the value of dwellings for operators
and others. Rent-to-value data from BEA are used
to compute a U.S. figure for gross imputed rental
value of farm dwellings as if they were rented to
others via a market transaction. In incorporating
the results of the 2007 Census, NASS revised down
its per-acre estimates of farm
real estate and as a consequence ERS revised
down its estimates for Gross Imputed Rent of Dwellings.
Production Expenses
The 2007 Census of Agriculture showed a significant
increase in the number of farms, and reversed the
downward trend that was shown in the annual estimates
of farm numbers since the 2002 Census of Agriculture.
The estimated number of farms in the U.S. in 2007
was revised from 2,088,790 to 2,204,950. The largest
revisions occurred in the $1,000-$9,999 and $500,000
and over economic classes. These revised farm number
estimates were used to summarize data from the 2007
Agricultural Resource Management Survey, the
source of primary survey data for farm production
expenditures. One impact of the increase in the
number of farms was to increase total farm expenses
by over $13 billion.
NASS and ERS publish the same set of farm production
expenditures except for livestock and poultry purchases,
interest, farm rents, and capital costs (where there
are conceptual differences). NASS
develops its production expenditure estimates
to reflect the total amount of funds expended by
farm operations during a calendar year. ERS develops
production expenditures as a component of the national
farm income accounts. Capital expenditures are an
example where concepts matter, with NASS including
the total expenditure and ERS including only an
estimate of the cost of capital used during a calendar
year. Likewise, ERS includes the interest cost associated
with all debt used in farming, whether owed by a
farm operation or some other farm stakeholder. The
largest revisions in 2007 production expense estimates,
as developed by ERS, occurred for feed (+$3.8 billion),
hired and contract labor (+$2.8 billion), and manufactured
inputs such as fertilizer, fuel, and pesticides
(+$2.6 billion). Together, these three input groups
accounted for 70 percent of the total revision to
production expense estimates for 2007. Revision
in expenditures could vary substantially among types
and sizes of farms based on commodities produced
and the composition of input use. Expense revisions
will also vary greatly among States based on the
prevalent size and types of farms and the mix of
inputs used.
d
Table
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See glossary.
See all Farm
Income data files.
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