Income Outlook and Financial Circumstances Vary Among
Farms
Average net cash income for farm
businesses (intermediate and commercial operations,
including non-family farms) is projected to be $69,100
in 2008. This would be almost a 2-percent increase from
the 2007 estimate of $67,900. The projected change in
income prospects for farm businesses will not affect all
farm operations in the same manner or to the same degree.
There is considerable variation in business structure,
including the extent to which assets are owned, the mix
of crops and livestock produced, the contribution of government
payments to gross income, and the relative importance
of energy inputs and borrowed capital to production costs.
Several classifications of farms—including commodities
produced and geographic location—reflect this diversity.
The income forecast across farm types reflects the dichotomy
in expected market conditions and production costs between
different crops and between crop and livestock producers
in 2008. Farms that specialize in the production of mixed
cash grains, wheat, corn, and soybeans are projected to
fare best, with most reaching their highest average net
cash incomes of this decade. For many of these producers,
commodity price increases stemming from strong demand
from the domestic biofuels industry and from foreign buyers
have outpaced substantial cost increases for important
inputs such as fertilizer, seed, and labor. Projected
increases in crop receipts for grains and oilseeds exceed
40 percent, while cash expenses are expected to rise by
as much as 26 percent.
After declining by almost 9 percent in 2007, average
net cash income of farm businesses that specialize in
cotton and rice production are forecast to fall by more
than 50 percent in 2008. Even though gross receipts are
forecast to increase by more than 16 percent in 2008,
they are eclipsed by sharp rises in costs for fertilizer
(58 percent), fuel (39 percent), and seed (28 percent).
These three inputs comprise more than half of total expenses
on farms that specialize in cotton and rice. For specialty
crop producers, receipts are not increasing enough to
keep up with projected higher expenses. Labor, fertilizer,
and seed represent 60 percent of total cash expenses on
these farms and together are forecast to increase by 21
percent in 2008 compared with a projected 8-percent increase
in crop receipts.
For most livestock farm businesses, average net cash
incomes are expected to fall below 2007 levels, with dairy
(-34 percent), and cattle operations (-19 percent) projected
to have the largest declines. On dairy farms, feed represents,
on average, 41 percent of total cash expenses. Feed expenses
are forecast to rise by 26 percent in 2008 and, coupled
with a projected 40-percent increase in fuel costs, will
quickly erode gains in gross receipts for milk and dairy
product sales. As a result, dairy farm business incomes
are expected to be about 2 percent below the previous
5-year average. For beef cattle businesses, 2008 will
likely see the third consecutive decline in average net
cash income since peaking in 2005 at $46,200. Price strength
resulting from brisk exports will help hog receipts outpace
rising costs in 2008. As a result, average net cash income
among hog farm businesses is project to increase by nearly
4 percent in 2008.
Geographic concentration of commodity production explains
much of the regional variation in income prospects for
farm businesses. Regions with a high concentration of
grain and soybean production, such as the Heartland
and Northern Great Plains are forecast to have
the largest increases in average net cash incomes. Regions
forecast to have the largest declines are the Eastern
Uplands, Fruitful Rim, and Southern
Seaboard, with net cash income falling 19-24 percent
from 2007 levels. Specialty crops, beef, and cotton account
for a large share of commodity production in these regions.
Average net cash incomes are also projected to decline
by more than 14 percent in the Northern Crescent, where
much of U.S. dairy production occurs.
Net cash income varies widely by size of farming operation
in 2008. Commercial operations (sales greater than $250,000),
which represent about 11 percent of U.S. farms and 75
percent of production, are expected to see a 2-percent
increase in average net cash income. Intermediate farms
(primary occupation of farming and gross sales below $250,000)
are expected to have the largest income gain over 2007,
at 4 percent. These farms tend to specialize in cash grain
and soybean production. About 63 percent of U.S. farms
are classified as rural residences—operators of
which typically earn most of their household income from
off-farm sources. The vast majority of these rural-residence
farmers were employed off-farm prior to becoming a farmer,
with a much larger share of both operators and their spouses
having off-farm jobs. The farm operations of these households
have for many years averaged a negative net cash income,
with 2008 no exception.
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