Note: The data tables referenced on this page are all available in the ERS data product, Farm Income and Wealth Statistics.
Net Farm Income Forecast To Increase 15 Percent in 2013
Net farm income is forecast to be $131.0 billion in 2013, up 15.1 percent from 2012’s estimate of $113.8 billion. After adjusting for inflation, 2013’s net farm income is expected to be the highest since 1973. Net cash income is forecast at $129.7 billion, down 3.4 percent 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 by nearly 3 percent in 2013. The projected increase in livestock receipts (5.8 percent) is not sufficient to offset increasing expenses and lower crop receipts. Nevertheless, after adjusting for inflation, net cash income is expected to remain high by historical standards.
- Net cash income is forecast to decline by more than 3 percent from 2012.
- Net farm income is forecast to increase 15 percent, which would result in the highest inflation-adjusted amount since 1973. Unlike net cash income, net farm income includes change in inventories and other adjustments.
- The projected $10.9-billion (3.2 percent) increase in total production expenses in 2013 continues a string of year-to-year increases (except for 2009) that have taken place since 2002.
- The value of livestock production is expected to increase by 6 percent in 2013, with receipts increasing almost 6 percent.
- The value of crop production is expected to rise nearly 6 percent in 2013, although with large anticipated contributions to year-end inventories, crop receipts are expected to decline almost 3 percent.
- Increases in farm asset values are expected to continue to exceed increases in farm debt, leading to another new record high for farm equity.
- Farm financial risk indicators are expected to continue at historically low levels.
Solid Gains Foreseen in the Value of U.S. Agricultural Production in 2013
The value of crop, livestock, dairy, and poultry production are all expected to experience solid gains in 2013 as U.S. farm operations rebound from the 2012 drought. Increases in the value of corn for grain, hay, soybeans, poultry, eggs, and milk are leading the overall increase in production values. Crops particularly benefited from large production increases that under historical marketing patterns will likely go into storage for sale in 2014.
Sales and cash receipts for corn in 2013 are expected to decline significantly, reflecting a large decline in the average calendar year price of corn for the U.S. However, the large increase in U.S. corn yields and production in 2013 is expected to result in a large increase in end-of-year corn inventory, more than offsetting the predicted decline in receipts. Hence, corn value of production—which is the sum of corn cash receipts, home consumption, and value of annual inventory change—is expected to rise in 2013. Domestic use and exports of U.S. corn are expected to increase in the 2013 marketing year. Alcohol for fuel use is expected to recover in the 2013 marketing year from its 2012 decline. The price, receipts, and value of hay production are expected to rebound, benefiting from a sharp rise in yields, production, and quality.
Wheat receipts and value of production are expected to decline in 2013. Both reflect expected reductions in acres harvested, production volume, price, and domestic use. A slight increase is expected in U.S. wheat exports. Rice receipts and value of production are expected to rise slightly, reflecting a strong anticipated price increase offsetting an expected decline in rice production. Demand for U.S. rice exports in the 2013 marketing year is expected to decline, reflecting reduced exports of U.S. milled rice.
Soybean prices and receipts are expected to decline slightly, but increased yields and production in 2013 translate into forecast increases in both the value of inventory change and the value of soybean production. The USDA anticipates increased domestic use and exports during the 2013 soybean marketing year. Peanut receipts are expected to decline 35.2 percent, reflecting a sharp drop-off from 2012’s unusually high production level.
Cotton receipts and value of production for lint and seed are expected to decline significantly, reflecting a substantial decline in export demand for U.S. cotton. While a slight increase in domestic use is predicted, a large decline is expected in the amount of cotton lint acres planted, yield, and production.
Cash receipts for the vegetables and melons category are forecast to rise over 25 percent in 2013. Potato receipts are expected to increase and dry bean receipts decrease. Almost the entire gain in vegetable and melon receipts is expected to occur in the “other vegetables” category. While total production of other vegetables is expected to decline, as the decline in processing more than offsets the forecast increase in fresh production, a substantial increase (35.6 percent) in the forecast vegetable price index means an almost $5-billion increase in receipts from other vegetables. Cash receipts from the sale of fruits and nuts are expected to decline in 2013 despite an anticipated small rise in the all-fruit price index. Double-digit declines are forecast in sales of avocados and sweet cherries, while strong gains in sales are expected for peaches, prunes and plums.
The value of livestock, dairy, and poultry receipts is expected to increase in 2013, reflecting especially large gains in broilers, milk, and hogs. Gains in broiler receipts reflect higher expected prices and increases in both domestic use and exports. Higher forecast milk receipts reflect an expected increase in production sold at considerably higher average prices. Higher forecast hog receipts reflect a predicted increase in domestic and export hog sales at a higher annual average price. Chicken egg receipts are expected to be up 8.8 percent in 2013 while turkey receipts are expected to decline 8.1 percent.
Production Expenses Continue To Climb But at Slower Rate
The projected increase of 3 percent in total expenses in 2013 continues a string of annual increases since 2002, with the exception of 2009, as expenses are forecast to reach another nominal (and inflation-adjusted) record-high, at $352 billion. However, the expected rise in 2013 is less than half of the increases in 2012 and 2011. The smaller expected increase in 2013 is due to a slowdown in the rise of prices paid for farm inputs. The Production Items, Interest, Taxes, and Wage Rates (PITW) prices-paid index—an overall average of prices paid for farm inputs and services calculated by USDA’s National Agricultural Statistics Service (NASS)—is forecast to rise 2.4 percent during the year, compared to 6.0 percent in 2012.
Large increases should occur in expenses for labor; marketing, storage, and transportation; net rent to nonoperator landlords; and miscellaneous items (other livestock expenses, custom feeding, general production expenses, irrigation water, and general management expenses). The unusually large (12 percent) increase forecast for marketing, storage, and transportation expenses results from the anticipated increase in crop production. A large decrease is expected in fertilizer and lime expenses. Expenses for fuels and oils, real estate interest, and capital consumption should decrease a small amount.
The two major livestock-related expenses—feed and livestock/poultry purchases—combined are forecast to rise 1.8 percent. This increase is significantly less than during the previous 2 years, largely due to smaller increases in the average annual prices for feed and cattle. Feed prices were slightly below December 2012 levels through the first 8 months of 2013 and are projected to decline through the 4th quarter of 2013 due to lower corn and soybean prices. Feeder cattle prices started the year lower than last year but began to rise in July and are likely to continue to rise through the end of the year. This increase is a result of tight feeder cattle inventories, solid demand for beef (both domestic and export), and the prospect of lower feed costs.
The three major crop-related expenses are expected to drop a combined 1.4 percent. Seed and pesticide expenses are expected to rise but a large decrease is forecast for fertilizer expenses. The ultimate size of the decrease will depend on buying patterns. Fertilizer prices were down only slightly from 2012 through mid-2013 when most fertilizer was purchased. Since then, prices have declined sharply. The small forecast drop in fuel and oil expenses is the result of a projected decrease in the Refiner Average Acquisition Cost.
The major livestock and crop-related expenses, plus fuels and oils and electricity, are the components of farm-origin and manufactured inputs expenses. These two groups of expenses now constitute 48 percent of total expenses, up from 42 percent a decade ago as these expenses rose 106 percent during this time, compared with a 60-percent rise in other operating and overhead expenses.
Payments to Stakeholders To Rise Less Than Net Value Added in 2013
Net value added is distributed among stakeholders and equity owners. Stakeholders provide the hired labor, leased capital, and rental land used in agricultural production. Since stakeholders do not own what is produced, they do not share in the risks involved in producing highly variable agricultural output. Subsequently, the payments that stakeholders receive are more stable over time than net returns to the owners of agricultural production. Payments to stakeholders can move in a different direction than net value added, as occurred in 2009 and 2011. In 2013, payments to stakeholders are expected to rise $4.7 billion (8.0 percent). Since net value added is forecast to rise 12.7 percent, the share of net value added going to stakeholders in 2013 is expected to drop to 32 percent from 34 percent in 2012.
Employee compensation (hired labor) is expected to increase 11.0 percent in 2013. Combined with the increase in 2012, hired labor expenses will have risen 32.5 percent in the last 2 years. Total labor expenses (including contract labor) are expected to climb by almost 10 percent in 2013 due to a 4-percent increase in wage rates and a nearly 6-percent rise in total output. Despite reductions in vegetable and fruit/nut production, contract labor in 2013 will rise slightly. Output on greenhouse/nursery and dairy farms—farms that typically employ a large share of the sector’s hired laborers—will likely be up more than 4 percent. The production of grains and oilseeds is also expected to use much more hired labor in 2013 than was used in 2012.
Net rent to nonoperator landlords is forecast to rise $1.3 billion (8 percent) in 2013, following a $3.0-billion increase in 2012. Cash rent is forecast up 6.6 percent, the result of an increase in land values and a small decline in planted acreage. Share rent is forecast up 6.2 percent, the same as the increase in the value of crop production. Government payments and crop insurance indemnities received by landlords are a consistent proportion of sectorwide payments and indemnities. Government payments and crop insurance indemnities received by landlords are expected to be 12 percent and 22 percent higher in 2013, respectively.
Total interest expenses are forecast to increase 3 percent in 2013 as nonreal estate interest expenses climb by almost 10 percent and real estate interest expenses decline by more than 2 percent. Debt and interest rates are discussed in the Assets, Debt, and Wealth section.
Government Payments Forecast To Increase Slightly in 2013
Government payments paid directly to producers are expected to total $11.4 billion in 2013, representing a 6.8-percent increase from 2012. Fixed direct payments under the Direct and Countercyclical Program and the Average Crop Revenue Election Program (ACRE) are forecast at $4.39 billion for 2013, down 6.3 percent from 2012. The decline is largely due to sequestration.
Despite recent price downturns, 2013 commodity prices are above levels that would trigger countercyclical payments, marketing loan gains, and loan deficiency payments. However, based on 2012 crop-year revenue losses, farmers are currently expected to receive $250 million in ACRE revenue payments, mostly for corn and soybeans that were hardest hit by drought.
Supplemental and ad hoc disaster assistance payments are forecast to increase by 84 percent from 2012 levels. Under the Supplemental Revenue Assistance Program (SURE), the bulk of the expected $1.68 billion paid to producers in 2013 are for commodity losses incurred during the 2011 crop year. Noninsured Assistance Program (NAP) payments of $280 million are expected to be made to livestock and specialty crop producers for which no Federal insurance programs are available. Except for NAP, disaster relief programs under the extended 2008 farm legislation only covered losses incurred prior to October 1, 2011. Thus, drought-related commodity and livestock losses for the 2012 crop year currently are not covered.
2013 Farm Income Forecasts: November Versus August
USDA’s November forecast for 2013 represents a large upward revision in net farm income (up $10.4 billion or 7.9 percent) from the August forecast. The forecast of net cash income for the farm sector is about $8.9 billion (6.8 percent) higher relative to the August forecast. Net cash income excludes non-cash items included in net farm income, such as value of inventory adjustment, gross imputed rental income, nonmonetary compensation of hired labor, and capital consumption.
Most of the upward revision in our expectations for 2013 farm income is the result of price gains in selected crops (soybeans, hay, fruits and nuts, other vegetables and melons). An upward revision in our forecast for the value of crop inventory change reflects increased price expectations, as well as an upward revision in the forecast quantity of corn production. The forecast value of livestock production is revised upward as increases in red meats, dairy, and chicken eggs more than offset anticipated declines in poultry. Price expectations are revised substantially upward for cattle. Increased prices are also now expected for hogs, milk, and eggs, whereas price expectations are adjusted downward for broilers and turkeys. Production of cattle and chicken eggs are revised upward, milk downward. Forecasts for expenses were reduced as large downward adjustments in purchases of fertilizer and feed more than offset increases in other purchased inputs and employee compensation.