U.S. farm income will jump 31 percent this year to a record $103.6 billion because of higher crop and livestock prices, the government said.
The U.S. Department of Agriculture boosted its estimate from $97.3 billion forecast in February. Income in 2010 totaled $79.1 billion. Receipts from sales of farm commodities will jump 18 percent from last year, with values for crops including corn, soybeans, wheat and cotton surging by 19 percent to $206.5 billion and livestock sales climbing by 16 percent to $163.8 billion, the department said today in a report on its website.
Rising farm incomes, which increase land values and spur purchases of Monsanto Co. seeds, Agrium Inc. fertilizer and Deere & Co. tractors, have been driven by greater demand for exports and biofuels. The U.S. may ship a record $137 billion of farm goods overseas, the USDA said in May. That figure will be updated tomorrow. Ethanol will consume a record 5.1 billion bushels, or 39 percent, of this year’s projected corn crop, the department said on Aug. 11.
“Commodity prices are higher,” said Bob Young, the chief economist for the American Farm Bureau Federation in Washington. “We had a tight stock situation coming into the calendar year. As we had challenges putting the crop in the ground, that held prices up,” he said. Prices are also being supported by concern harvests may be smaller than forecast, he said.
Corn futures have soared 74 percent from a year ago, soybeans were up 42 percent and wheat 13 percent while cotton reached a record in March. The increases are offsetting lower yields for some grains and oilseeds and a projected smaller cotton crop, pushing profits above the USDA’s February prediction.
Expenses such as diesel fuel and animal feed were projected to rise by $32.5 billion, exceeding $300 billion for the first time, the USDA said. Government payments will decrease by almost 18 percent to $10.2 billion, according to the report.
The increase in farm income, which is projected to be the biggest gain since 2004, drove agricultural real-estate prices to a record $2,350 an acre this year, the USDA said in a report earlier this month. Deere, the world’s largest farm-equipment maker, reported fiscal third-quarter profit on Aug. 17 that topped analysts’ estimates and raised its full-year earnings forecast as global demand improved.
Gross-farm income, which includes rent and other benefits from operations, is projected to reach $399.1 billion, down 0.8 percent from the February forecast and up 16 percent from 2010.
Among farmer costs in 2011, fertilizer expenses will rise 25 percent to $26.2 billion, while spending on fuel may surge 24 percent to $16.4 billion, the USDA said. Feed costs are projected to increase 20 percent to $54.6 billion, and seed expenses may rise 9.7 percent to $17.9 billion. The cost of purchased livestock and poultry also rose, jumping 12 percent to $22 billion.
The higher expenses will continue into 2012, potentially eroding profit that may be below the record for years to come, said Chris Hurt, an agricultural economist at Purdue University in West Lafayette, Indiana.
“2011 will be the high for incomes for several years,” he said. “Machinery costs could escalate, and fertilizer could get more expensive with higher corn and soybean prices.”
The USDA will revise its estimates in November.