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Monday, December 30, 2013

U.S. Farm Income - R40152

Randy Schnepf
Specialist in Agricultural Policy

According to USDA’s Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at a record $131 billion in 2013, up 15% from last year, and about $13 billion above 2011’s previous record.

In addition to record net farm income, farm wealth is also at record levels. Farm asset values— which reflect farm investors’ and lenders’ expectations about long-term profitability of farmsector investments—are expected to rise nearly 7% in 2013 to a record $3,008 billion for a fifth consecutive year of gains. Farm land cash markets have continued to see gains related to strong crop prices in 2013. Since 2008, farm asset values are up 49% while farm debt has risen by only 28%. As a result, the farm debt-to-asset ratio has declined steadily since 2008 and is expected to fall to 10.3%, its lowest level since 1960.

At the farm-household level, average farm income (the sum of both on- and off-farm income) is projected up slightly, at $109,035, in 2013 for a fourth consecutive year of growth. The share of farm income derived from off-farm sources had increased steadily for decades but appears to have peaked at about 95% in 2002. In 2013, off-farm income sources are forecasted to account for about 82% of the national average farm household income, compared with about 18% from farming activities. Over the past decade, farm household incomes have surged ahead of average U.S. household incomes. In 2012 (the last year for which comparable data were available), the average farm household income of $108,844 was about 53% higher than the average U.S. household income of $71,274.

The 2013 outlook for a third year of strong farm income occurs in spite of slow growth in the domestic economy and the lingering effects of the 2012 drought—the most severe and extensive drought in at least 25 years. The 2012 drought destroyed or damaged a significant portion of the U.S. corn and soybean crops, with deleterious impacts on all U.S. livestock sectors—cattle, hogs, poultry, and dairy—as feed costs reached record levels. However, a return to trend yields in 2013 is expected to generate record-large harvests of major crops which, in turn, would likely benefit livestock producers in the second half of the year and into 2014 as crop prices are expected to decline sharply from record-high levels. Cash grain farmers in the Corn Belt and Northern Plains are expected to experience a third year of near-record revenues as higher output offsets a substantial portion of the anticipated crop price decline.

Government farm payments, at $11.4 billion, are expected to remain relatively small in 2013 (third-lowest total since 1997) as high commodity prices continue to shut off payments under the price-contingent marketing loan and counter-cyclical payment programs.

These data suggest a strong financial position heading into 2014 for the agricultural sector as a whole relative to the rest of the U.S. economy, but with substantial regional variation. Declining prices for most major program crops signal tougher times ahead. Eventual 2013 agricultural economic well-being will hinge greatly on the final 2013 crop harvests and harvest-time prices, as well as both domestic and international macroeconomic factors including economic growth and consumer demand.

Date of Report: December 3, 2013
Number of Pages: 34
Order Number: R40152
Price: $29.95

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