This afternoon, the Economic Research Service of USDA released its “Agricultural Income and Finance Outlook” report.
The December 2010 report shows net farm income is forecast at $81.6 billion in 2010, up 31% from 2009 and 26% higher than the 10-year average of $64.8 billion for 2000 to 2009. Net cash income at $92.5 billion would be a nominal record, 2.3% above the prior record attained in 2008.
Net value added is expected to increase by almost $20 billion in 2010 to $132 billion. Production expenses are forecast to rise moderately, reversing the significant declines seen in 2009. However, nominal total production expenses in 2010 and 2009 still constitute the second- and third-highest totals ever.
Farm business equity (assets minus debt) is expected to rise nearly 4%, largely due to an expected
3% increase in the value of farm business real estate and a 2% decline in farm business debt. The farm business sector’s debt-to-asset ratio is expected to decline to 11.3% and the debt-to-equity ratio is expected to decline to 12.8% in 2010, indicating that the farm sector’s solvency position remains strong.
Average net cash income for farm businesses is expected to increase throughout much of the country in 2010. The expected strong recovery in dairy, hog, and cattle receipts will result in much higher average net cash incomes for farm businesses in the Northern Crescent, Basin and Range, and Prairie Gateway.
In the Northern Crescent, where dairy is a prominent commodity, average net cash income for farm businesses is forecast to increase by over 58%. Incomes are expected to be almost 50% higher in 2010 for farm businesses in the Basin and Range region where cattle are an important commodity, a region that showed the largest percentage decline in average net cash income in 2009. Average farm household income of principal farm operators — from farm and off-farm sources — is forecast to be $83,194 in 2010, up 7.8% from 2009. This contrasts with the change for the 2008 to 2009 period, when average farm household income declined by 3.3%.
Livestock, Cotton Receipts Expected to Bounce Back in 2010
Dairy receipts are expected to increase by almost a third in 2010, as milk prices received by dairy farmers are projected to increase more than $3 per hundredweight (cwt). Cattle and calf cash receipts are expected to increase 13% in 2010. Hog cash receipts are expected to increase 26% over 2009 cash receipts due to stable pork demand and lower year-over-year pork production. Broiler cash receipts are expected to increase over 11% in 2010 due to an increase in prices and to the gradual reopening of exports to Russia. Egg cash receipts are expected to increase slightly in
2010 due to increased exports to Asia and the European Union, more than offsetting losses in exports to Canada and Mexico.
Crop Farms to Contribute 64% of U.S. Agriculture’s Net Value Added in 2010
Crop farms account for less than half of U.S. farm operations but make up more than 70% of the sector’s payments to stakeholders and more than 57% of U.S. agriculture’s net farm income. Crop farms are expected to contribute almost 64% of U.S. agriculture’s 2010 net value added, with cash grain and soybean farms accounting for half of that. High-value crop farms accounted for less than 7% of all U.S. farms in 2009, but accounted for nearly one-third of the value of the sector’s crop production.
Size matters in agriculture. Bigger farm operations, while fewer in number, contribute the bulk of the value of U.S. farm production and receive the lion’s share of agriculture’s net farm income.
For example, farm operations with over $1 million in 2010 sales are expected to account for over 60% of U.S. livestock value of production and almost 54% of U.S. agriculture’s 2010 net farm income.