Net Farm Income Estimated at $79.1 Billion in 2010
Net farm income was an estimated $79.1 billion in 2010, up from the $61.6 billion farmers are estimated to have earned in 2009. The year-to-year increase amounted to $17.4 billion or a rise of 28 percent. Net farm income in 2010 was 22.5 percent higher than the 10-year average of $64.6 billion earned over the 2000-09 period.
Net cash income in 2010 was $92.3 billion, an increase of $17.9 billion (24.1 percent) over the previous year. Net cash income was 27.9 percent above its 10-year average of $72.2 billion. Net value added in 2010 reached $129.9 after a rise of $18.3 billion.
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Amounts in this article are in nominal dollars. Estimates and forecasts in constant (2005=100) dollars are available.
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Large Gains in Livestock Lead to a Recovery in Farm Commodity Sales in 2010
Annual sales of crops and livestock by U.S. farm operations rose almost 9 percent in 2010, with livestock accounting for over 80 percent of the increase. Gains in cattle and calves and milk receipts accounted for 57 percent of the total increase. Other big percentage gains in livestock were registered for hogs, sheep and lambs, turkeys, ducks, honey, mohair, wool, crawfish, and mink. Crop sales rose 2.7 percent, as increased receipts for feed crops, cotton, fruit and nuts more than offset declines in food grains, oil crops, tobacco, vegetables and melons.
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Large annual gains in 2010 meat animal sales reflected large price gains of greater than $10 per cwt for all major livestock categories accompanied by increased quantities sold for all but hogs and lambs. Production of beef/cattle in 2010 benefited from adequate pastures in most areas in the 2010 spring thanks to a snow-laden winter and positive feeding margins. U.S. beef and veal exports increased by 19 percent, evidence of recovering global economies, strengthening demand, and a tightened world beef supply. Exports to a variety of countries, including Hong Kong, Taiwan, Egypt, and Russia in addition to Japan and South Korea, were the primary cause of the boost in U.S. beef exports in 2010. All U.S. red meat, dairy, and poultry exporters have benefited from a weak dollar relative to competing exporters. For pork, lower domestic supplies combined with strong export demand boosted hog prices in 2010. The largest annual livestock price gain, however, was for lambs, reflecting very tight domestic supplies in the face of increasing global demand.
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Strong domestic commercial use and dairy product exports resulted in higher prices for milk in 2010. U.S. farm operation sales of milk increased almost 29 percent, reflecting a $3.43 increase in the annual wholesale milk price and a small increase in milk production. Export demand for butter and cheese is especially strong, with cheese prices also benefiting from strong domestic demand. Production per cow increased 0.7 percent in 2010, below the 10-year average, but more than offsetting the decrease in cow numbers.
Poultry and egg sales grew over 9 percent in 2010. Broilers accounted for 63 percent of 2010 poultry and egg sales as broiler prices and quantities sold increased. While a slight decline in production and lower cold storage holdings of turkeys reduced quantity sold, a 12-cent-per-pound price increase resulted in a 22-percent increase in annual sales. Turkey exports increased 9 percent in 2010. More chicken eggs were sold at higher prices, benefiting from strong export sales in table eggs.
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U.S. farm operation sales of food grains declined in 2010 as wheat sales declined over 7 percent. Wheat’s decline resulted from declines both in quantity sold and prices. Total domestic use of wheat in marketing years 2009 and 2010 was down from 2008. Declining per capita consumption has reduced the demand for both flour and wheat. Continued high extraction rates are further limiting the amount of grain needed to produce the flour demanded. Feed and residual use is also down from the 2008 marketing year. While wheat exports declined in marketing year 2009, a larger increase is anticipated by the end of marketing year 2010.
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Feed grain sales increased, in 2010, reflecting the large role of corn, which accounted for 85 percent of U.S. feed crop receipts in 2010. Corn sales increased over 5 percent, reflecting more corn sold in 2010 at a higher annual price. Corn exports for the 2010 marketing year declined from 2009 while U.S. domestic use increased. Food, seed, and industrial use of corn increased over 8 percent in marketing year 2010. Most of the increase in domestic use results from increased ethanol production. Weak U.S. beer consumption and feed use reduced demand for barley.
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Cotton sales increased over 50 percent in 2010, reflecting gains for upland and extra-long staple lint as well as cottonseed. Lint sales benefited from increased quantities sold at higher prices. Upland cotton lint producers benefited from large increased quantities sold for both domestic mill use and for exports in marketing year 2010. Extra-long staple cotton quantities sold to U.S. mills were stable across marketing years 2008-2010 though exports increased substantially in the latter two years. Cottonseed’s annual price declined from 2009, but sales benefited from a large increase in the quantity sold in the 2010 marketing year.
Oil crop sales declined in 2010 as a decline in soybean sales more than offset gains in other oil crops. While soybean prices rose, quantities sold declined almost 5 percent. Despite increased seed, feed, and residual use as well as exports in marketing year 2010, the soybean crush declined almost 6 percent. Increased peanut sales reflected a 12.6-percent rise in annual quantity sold accompanying a 1-cent-per-pound rise in price.
The total value of vegetable and melon sales declined almost 2 percent in 2010 despite a slight increase in per capita net domestic use of all vegetables, melons, potatoes, sweet potatoes, pulse crops, and mushrooms. Increased domestic use of fresh-market vegetables and melons, dry edible beans, and sweet potatoes outweighed reduced use of processing vegetables and potatoes. Among the bigger selling categories, dry beans, lettuce, and onion sales increased while sales of tomatoes and potatoes declined almost 10 percent. Potato sales reflect the small size of the 2010 fall crop, whereas dry beans experienced a large crop in 2010. Tomato producers saw declines in quantities sold for both fresh and processing tomatoes; while fresh tomato prices increased over $7 per cwt and processing prices declined almost $15 per ton. A slight increase in the quantity of fall potatoes sold was more than offset by a price decline. Declines in quantities sold for spring and storage onions were offset by large price increases, especially for spring onions. Record high watermelon supply and demand led to a 1-percent gain in per capita melon use.
Sales of fruit and tree nuts were strong in 2010, with double-digit growth over the previous year. Large 2009-2010 percentage gains in sales were recorded for fresh apples, almonds, walnuts, and pistachios. Sales of fresh apples benefited from a small increase in quantity sold at a higher annual price. Large increased sales for almonds, walnuts, and pistachios resulted from large increased quantities sold and substantial price gains.
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Total Production Expenses Rose Moderately in 2010
Total production expenses in 2010 are estimated at $285.6 billion, $4.5 billion (1.6 percent) higher than the $281.1 billion estimated for 2009. This change is modest relative to increases of $36.5 billion (15.7 percent) in 2007 and $23.7 billion (8.8 percent) in 2008, followed by a $12.0-billion (4.1-percent) drop in 2009. The 2010 estimate puts nominal expenses at their second highest level ever.
On the price side, the prices-paid index for Production Items, Interest, Taxes, and Wage Rates (PITW) rose 2.1 percent in 2010. On the quantity side, total output was down 0.5 percent, as crop output dropped 1.7 percent and livestock output rose 1.0 percent. Total expenses were about 78 percent of gross farm income, around 4 percentage points less than in 2009. Livestock and poultry purchases and net rent to nonoperator landlords both rose nearly $3 billion (17 percent and 30 percent respectively). Miscellaneous expenses fell $2.5 billion and total labor expenses were down $1.3 billion.
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After rising $18.9 billion (67 percent) from 2006 to 2008 and declining $1.9 billion (4 percent) in 2009, feed expenses rose less than 1 percent in 2010. During 2010, the prices-paid index for feed declined 3.2-percent and livestock output increased 1.5-percent. Because corn accounts for around 90 percent of feed grains used for feed and soymeal is the principal oil crop product used as feed, prices paid for grain feeds depend mainly on the prices for these two commodities. The annual average price for corn in 2010 was only 4 cents higher than in 2009 but corn prices rose around 19 percent through the course of the year. The annual average price for soybeans rose 30 cents with soybean prices rising 12 percent through the year. Soymeal prices fell almost 10 percent. The price of another important feedstock, hay, was down around 5 percent. The timing of price changes matters because changes in the prices paid for complete feeds, the most heavily weighted component of the feed prices-paid index, usually lag price changes in grains and oilseeds. On the quantity side, feed-year Grain Consuming Animal Units and feed and residual use of corn were each down around 1 percent. Domestic disappearance of soymeal was also down slightly.
After falling $2.1 billion in 2008 and 2009, livestock expenses increased $2.9 billion (17 percent) in 2010. Since cattle and calf purchases account for more than 75 percent of this expense, the situation in this market has the biggest effect on these purchases. During the first half of the year, relatively high retail prices for beef were keeping feedlot returns profitable. Retail prices were being buoyed by a number of factors. First, improving foreign economies revived demand for beef. Beef exports were 19 percent higher in 2010. Second, supplies of beef were limited as commercial beef production remained low. Finally, prices for competing meats, pork and poultry, were relatively high. Feedlot margins tightened during the second half of the year. Fed cattle prices leveled off while the cost of feed began to rise. Feeder steer prices also started climbing. Farm prices for cattle were higher in each quarter of 2010 and up 14 percent annually. This increase occurred, in part, because tightened supplies of feeder cattle finally began to have an effect on prices.
Following a $2.2-billion (4.5-percent) decrease in 2009, principal crop-related expenses were $48.0 billion in 2010, 1.7 percent higher than in 2009. Fertilizer and seed expenses were each up around 5 percent, while pesticide expenses fell nearly 8 percent. Acres planted to principal crops in 2010 were down 2.6 million acres (0.8 percent), the second straight annual decline. A 5.6-million-acre decline in wheat planted was partly offset by increases in corn and cotton acreage, both of which are heavier users of fertilizer and pesticides. Total crop output was calculated to be down 1.7 percent, with grain and oilseed production down 2.9 percent. Fruit and vegetable production were each down more than 5 percent.
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Seed prices have been rising rapidly because farmers have been making greater use of genetically engineered (GE) seeds with biotechnology advancements and improved yield potential. Since 1999, prices paid for seeds have risen 146 percent, with 64 percent of that rise occurring during 2007-2009. The price increases slowed in 2010, with the prices-paid index for seeds rising a relatively small 3.6 percent. The slower rise in the prices paid index coupled with the drop in crop output made the $800-million (5.2- percent) increase in seed expenditures in 2010 surprising. Analysts believe that farmers used GE seeds more heavily than their current weight in the prices-paid index, yielding an artificially low prices-paid index. Corn is a particularly heavy user of GE seeds, and corn planted increased 1.7 million acres in 2010.
Fertilizer prices rose steadily between 2002 and 2008, with the annual average prices paid for fertilizers climbing 264 percent. During this period, fertilizer expenses rose $12.9 billion (134 percent). In 2009, the prices-paid index for fertilizer plunged nearly 30 percent and then declined another 8.4 percent in 2010. However, fertilizer prices rose from their beginning-of-year levels. One factor in that rise was an increase in the price of natural gas, the primary source of nitrogen fertilizers. In addition, higher crop prices, especially for corn, generated increased demand. Use of fertilizer on planted acreage during 2010, measured as acres planted times typical per-acre application rates, was up. (For the source of application rates, see Agricultural Chemical Usage.) While most of the fertilizer used in 2010 was purchased before fertilizer began its late-year price increases, analysts believe that producers began prepurchasing fertilizer for the 2011 growing season in unusually large amounts as prices began rising in July. This resulted in an increase in fertilizer expenses for the year.
Pesticide expenses rose steadily from 2002 to 2008. In 2007-08 alone, they rose $2.7 billion (30.0 percent). Since prices paid for pesticides rose only 8.4 percent during those 2 years, increased use was a major factor in increased pesticides expense. Even though prices paid for pesticides continued to increase in 2009, pesticide expenditures fell slightly. Estimates of pesticides expenditures fell $900 million (7.8 percent) in 2010. The prices-paid index for pesticides fell 2.5 percent and planted acreage declined 1.0 percent.
As with fertilizer, prices paid for fuel rose dramatically between 2002 and 2008. During this period, annual average prices paid for fuel jumped 207 percent and fuel prices registered 6 straight double-digit percentage increases. After falling 34 percent in 2009, annual average prices paid for fuels were back up 24 percent in 2010. The decrease in acres planted should have translated into less use of fuel during 2010. The estimate for fuel expenditures was up $493 million (3.9 percent). With the increase in the prices-paid index, greater expenditures were expected. What analysts believe happened is, as with fertilizer, when fuel prices began to rise rapidly at the end of 2009, producers prepurchased fuel in large amounts. The price and quantity indications in 2009 predicted a 35-percent fall in expenditures but actual expenditures were down only 22 percent. Again, as with fertilizer, fuel purchased during the latter part of 2009 would have been bought at prices higher than the annual average.
Payments to Stakeholders (Hired Labor, Net Rent, and Interest) Rose in 2010
Payments to stakeholders, the returns to nonowner capital, were $50.8 billion in 2010, $858 million (1.7 percent) higher than in 2009. The increase was due to a large increase in net rent to nonoperators that was only partially offset by drops in hired labor and interest expenses. Payments to stakeholders constituted 17 percent of projected total expenses in 2010, nearly identical to 2009, and 39 percent of net value added, down from 45 percent in 2009.
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Total labor expenses declined $1.3 billion (4.4 percent) while employee compensation (hired labor) decreased by $1.3 billion (5.3 percent) and wage rates increased 1.2 percent. Vegetable, fruit, nut, dairy, and greenhouse/nursery operations employ the most labor. Output increased for fruit and nuts, greenhouse and nursery, and dairy farms. Output on vegetable farms fell slightly. Taken together, cash receipts for the commodities produced by these farms were up 11.5 percent.
Net rent to nonoperators was $2.9 billion (29.6 percent) higher than in 2009. Cash rent rose $1.5 billion (10.2 percent). Cropland cash rents per acre in the most recent Agricultural Land Values and Cash Rents were up 3.0 percent. Share rent went up $1.7 billion (24.4 percent) in 2010 as cash receipts rebounded. Government payments to landlords were nearly the same as in 2009 and FCIC indemnities received by landlords were up a small amount.
Interest expenses were down almost $700 million (4.6 percent) in 2010. Both real estate and nonreal estate interest expenses decreased as real estate and nonreal estate debt and interest rates all fell. Debt and interest rates are discussed in greater depth in the balance sheet section.
Government Payments Were $12.4 Billion in 2010
Direct government payments were $12.4 billion in 2010, up slightly from 2009 and 19 percent below the 5-year average for 2005-09. In 2010, direct payments to producers enrolled in the Direct and Countercyclical Program (DCP) were $4.3 billion and direct payments to producers enrolled in the Average Crop Revenue Election Program (ACRE) were $510 million. Total direct payments from the two programs of $4.8 billion represented a 2-percent increase over 2009 levels. Direct payment rates are fixed in legislation and are not affected by the level of program crop prices.
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All commodity programs issuing payments to producers based on current prices paid out $748 million in 2010. Due to high crop prices in 2010, these payments were 67 percent below their 2009 levels. For the first time since authorized by the 2008 Farm Act, the ACRE program made $422 million in revenue-based payments, accounting for 56 percent of all price-based payments. A surge in cotton prices in 2010 resulted in producers receiving $209 million in countercyclical payments – an 82 percent decline from 2009 levels. Similarly, $117 million in marketing loan benefits—including loan deficiency payments, marketing loan gains, and certificate exchange gains—were paid out in 2010, a 90-percent decrease from 2009 levels.
Strong milk prices led to producers receiving $52 million in Milk Income Loss Program payments in 2010, a drop of 94 percent from 2009. Tobacco Transition Payment Program (TTPP) payments were $687 million or 14 percent lower than in 2009. Payments reported here include both CCC payments and lump-sum payments. Begun in 2005, this program provides payments over a 10-year period to eligible quota holders and producers of quota tobacco. Lump-sum payments to individuals are made through agreements with third parties in return for their rights to the 10-year TTP payment stream.
Conservation programs include all those operated by the Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) that provide direct payments to producers. Conservation payments were $3.4 billion in 2010, representing a 22-percent increase from 2009. This increase is explained by fluctuations in conservation program payments other than Conservation Reserve Program payments, which have remained relatively constant over the last 5 years. These fluctuations are due to the time lags associated with (i) current fiscal year payments carrying over into the next calendar year, or (ii) when a newly authorized or reauthorized program is building up participation slower than the old program is being phased out. The Environmental Quality Incentives Program is an example of the former; the Conservation Security Program is an example of the latter.
Ad hoc and emergency program payments were valued at $2.6 billion in 2010. Producers received $2.0 billion in disaster payments authorized under the Supplemental Revenue Assistance Payments Program (SURE). Payments made by the Crop Assistance Program, Dairy Economic Loss Assistance Program, Emergency Conservation Program, Livestock Forage and Indemnity Programs, and the Noninsured Assistance Program accounted for 90 percent of the other disaster relief assistance.
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