Farm income projected to increase, but so are expenses
By JOHN O'CONNELL
The USDA has projected net farm income for 2013 will reach $128.2 billion, a 14 percent increase over last year's $112.8 billion and the highest figure since 1973, when adjusted for inflation.
Economists, however, warn the agency's estimate likely has less to do with a strong outlook for the coming crop year than quantities and values of inventories from one crop year spilling into the next.
USDA also projects net cash income -- which includes cash receipts from crop sales, government program payments and other farm-related income minus production costs -- will be $123.5 billion, down about 9 percent from 2012.
Net farm income adds to net cash income the value of carryover crops from the prior year, the value of commodities growers use for personal consumption and the rental value of farm dwellings and inventory.
University of Idaho Extension economist Paul Patterson said the strong net farm income figures likely reflect sales of 2012 crops at high prices to begin 2013. Furthermore, USDA notes a return to better weather this season following last year's drought should lead to greater production, lower prices and more of the 2013 crop being held for sale in 2014.
USDA predicts calendar-year receipts of crops grown in 2013 will decline by $3.2 billion, which would be the first decline since 2009, and production expenses should reach historically high levels at $353 billion, up by $19.2 billion.
USDA expects median total farm household income will rise 1.9 percent in 2013, to $58,845.
Livestock production value is expected to increase 3.5 percent in 2013, with calendar-year receipts increasing nearly 3 percent, mostly due to price increases. According to the report, increases in farm asset values should continue to exceed increases in farm debt, which should lead to another record high for farm equity.
Washington State University Extension economist Michael Brady believes increasing land values have likely driven the rosy equity picture.
"We're well into the new era of relatively higher farm commodity prices, which is a better world than most of the '90s where corn was between $3 and wheat was in that range," Brady said. "If there is a drop (in crop receipts) we're at a drop from high levels."
Brady believes strong export growth will continue to drive high prices for Washington's irrigated specialty crops, especially alfalfa.
Patterson said the report reflects "strong but declining crop prices in 2013 and strong and slightly increasing livestock and milk prices in 2013," as well as "flat government payments."
In Idaho, he anticipates calendar-year crop cash receipts will be down 5-8 percent to $3.1 billion to $3.2 billion in 2013. He estimates livestock cash receipts will be up 2-3 percent to $4.40 billion to $4.44 billion. Idaho farm expenses should also rise 2-4 percent to $6.25 billion to $6.35 billion, Patterson said.
Regarding Idaho's crops, he expects slightly lower prices and production of dry beans, slightly lower cash receipts for sugar beets, cash receipts down slightly but still above $500 million for hay, cash receipts down 3-4 percent for barley, cash receipts down 10 percent on both potatoes and wheat, beef calf prices up 10-15 percent due to a small U.S. herd and dairy prices that could be higher than 2012 in the first half of 2013 but lower in the second half.
Rupert farmer Duane Grant noted corn prices that reached $8 per bushel in 2012 due to drought in the Midwest should be closer to $6 per bushel this year.
"We're not projecting as good of returns in 2013. The margins are just not going to be as good in 2013 as they were in 2012," Grant said.
USDA projections for 2013 U.S. annual average prices of key commodities:
Corn: -1.4 percent
Barley: -13 percent
Hay: + 2.6 percent
Soybeans: -7.4 percent
Cotton: -13 percent
Potatoes: +2.5 percent
Dry Beans: -3.2 percent
Cattle: +5.2 percent
All Dairy: +3.9 percent