2013 Farm Business Net Cash Income To Remain Near 2012 Level
- Average net cash income for farm businesses is expected to decline less than 1 percent in 2013, and is still relatively high compared to the previous 5 years.
- Farm businesses that specialize in poultry, dairy, hogs and specialty crops are all forecast to experience an increase in average net cash income, largely due to increasing receipts. Most other specializations face declining receipts.
- While farm businesses face increasing expenses, some major expense categories are declining and feed prices are increasing less than in recent years.
Average net cash farm income (NCFI) is forecast at $101,300 for all farm businesses* for 2013, a decline of less than 1 percent, after a strong year in 2012 (see table ). This decline is in line with the sectorwide forecast for NCFI, which represents the amount of cash available to service debt, pay family living expenses, and make investments. It is not a comprehensive measure of profitability, however, since it does not account for changes in inventory, accounts payable, accounts receivable, and depreciation.
Most farm businesses specializing in program crops are forecast to experience a 4- to 6-percent decline in NCFI in 2013, with larger average declines (17 percent) anticipated for cotton and rice farm businesses. Most program crops are forecast to experience increased production and lower prices, with substantial increases in yield expected for several crops, including corn. The net effect is that crop receipts are forecast to decline 4 to 6 percent in 2013. However, cotton and rice farms will likely see a larger decline of about 9 percent due to both lower cotton acreage and cotton lint prices. For some producers, 2012 insurance indemnities will be paid in 2013, boosting NCFI.
Cash expenses, forecast to increase 1 to 2 percent, on average, for farm businesses specializing in program crops in 2013, are contributing to the anticipated decline in NCFI. Rent expenses are expected to increase by 6-7 percent. However, some major expense categories are expected to decline. Seed; fertilizer, lime, chemicals; and fuel together make up around half of all cash expenses for farm businesses specializing in program crops. While seed expenses are forecast up 4 percent, fertilizer/lime/chemical expenses are forecast down 6 percent, and fuel expenses are forecast down 2 percent.
Specialty crop farm businesses (fruits, vegetables, and nursery/greenhouse) are forecast to experience an increase in average NCFI of almost 5 percent in 2013. Crop receipts are expected to increase more than 4 percent in 2013, partially due to a nearly 36 percent increase in the vegetable price index. Labor expenses, which make up almost 40 percent of all cash expenses for specialty crop farms, are forecast to increase almost 10 percent due to both increasing wages and crop production. Total cash expenses are forecast to increase by 5 percent.
NCFI forecasts vary for farm businesses specializing in livestock production. However, livestock farm businesses across all specializations are expected to face a 2- to 3-percent increase in cash expenses. Feed costs are forecast to rise over 2 percent, and these costs make up 49 percent of expenses for dairy, 35 percent for hogs, 30 percent for poultry, and 21 percent for beef cattle farm businesses.
Dairy farm businesses are forecast to experience a 23-percent increase in average NCFI in 2013, with milk prices expected to be 7 percent higher than in 2012. Despite lower output from beef cattle farm businesses due to reduced herd size, higher prices for cattle and calves are expected to result in marginally higher beef cattle receipts. With production cost increases, average NCFI for beef cattle farm businesses is expected to decline 4 percent in 2013. With hog prices and production levels expected to increase, NCFI for hog farm businesses is projected to increase 7 percent in 2013. With an 18-percent increase in broiler prices predicted in 2013 as well as increasing production and exports, average NCFI for poultry and egg farm businesses is forecast up 25 percent from 2012.
Although 2013 average NCFI is forecast to be close to 2012 NCFI, there is considerable regional variation in expected performance in 2013. Differences in farm business performance across regions (see more on the ERS resource regions) are largely driven by production specialization.
- Farm businesses in the Basin and Range are forecast to experience a 10-percent decline in average NCFI, largely due to the performance of cattle farm businesses. The expected decline in cattle farm NCFI is also contributing to an expected 6-percent decline in net cash income in the Northern Great Plains.
- Substantial declines forecast in average cotton and rice farm business NCFI, as well as modest declines for corn and soybean NCFI, are contributing to the expected 18-percent decline in NCFI in the Mississippi Portal.
- Expected NCFI declines for corn and soybean farm businesses contribute to the expected 2-percent decrease in average NCFI for Heartland farm businesses.
- Expected gains in poultry are driving the relatively small projected decline in average NCFI in the Eastern Uplands (-2 percent) and an increase in the Southern Seaboard (3.5 percent).
- The forecast increase in dairy NCFI is contributing to gains in average NCFI in the Northern Crescent (8 percent) and Fruitful Rim (6 percent), which also benefits from expected gains in NCFI for specialty crop farms in 2013.
* Farm businesses are defined as operations with gross cash farm income of over $350,000 (labeled "commercial") or smaller operations where farming is reported as the operator's primary occupation (labeled "intermediate"). Approximately 11 percent of U.S. farms are commercial and 33 percent are intermediate. "Residence farms" comprise the remaining 56 percent of operations. These are small farms operated by those whose primary occupation is something other than farming.