Note: The data tables referenced on this page are all available in the ERS data product, Farm Income and Wealth Statistics.
Net Farm Income Forecast To Increase by Nearly 14 Percent in 2013
Net farm income is forecast to be $128.2 billion in 2013, up nearly 14 percent from 2012’s revised forecast of $112.8 billion. After adjusting for inflation, 2013’s net farm income is expected to be the highest since 1973. Net cash income is forecast at $123.5 billion, down almost 9 percent from 2012 (see table on farm income indicators ). Not all crops produced in 2013 will be sold by the end of the 2013 calendar year; we anticipate substantial increases in the annual quantity and value of crop inventories, particularly for corn. As a result, crop cash receipts are expected to decline in 2013. The small projected increase in livestock receipts is not sufficient to offset increasing expenses. Nevertheless, after adjusting for inflation, net cash income is expected to remain high by historical standards.
- Net farm income is forecast to increase 13.6 percent to $128.2 billion in 2013, which would be the highest inflation-adjusted amount since 1973. A return to trend yields would lead to record crop production levels and result in substantial year-end crop inventories and higher net farm income forecast for 2013.
- Net cash income is forecast to decline by nearly 9 percent from 2012. Unlike net farm income, net cash income does not account for capital consumption, change in inventories, and nonmoney income.
- The projected $19.2-billion increase in total expenses in 2013 continues a string of large year-to-year movements that have taken place since 2002. In both nominal and inflation-adjusted dollars, 2013 production expenses, at $353 billion, are expected to be the highest on record.
- The value of livestock production is expected to increase 3.5 percent in 2013, with receipts increasing nearly 3 percent. The projected gains result mostly from expectations of price increases.
- The value of crop production is expected to rise 11 percent in 2013, despite a predicted decline in crop receipts. The difference indicates the significant role of crop inventories. Crop receipts are forecast to decline by $3.2 billion in 2013, which would be the first decline since 2009.
- Increases in farm asset values are expected to continue to exceed increases in farm debt, leading to expectations of another new record high for farm equity.
- Farm financial risk indicators are expected to continue at historically low levels.
See the official USDA estimates and forecast tables in the Farm Income and Wealth Statistics data product.
Most figures in this article are in nominal dollars. Estimates and forecasts in constant (2005=100) dollars are available .
Value of Corn Production Expected to Reach All-Time High in 2013
The value of feed grain and oil crop production--which reflects cash receipts, home consumption, and the annual value of inventory change--is expected to rise in 2013 as large anticipated production increases more than offset expected price declines. See tables on U.S. farm sector crop cash receipts and value of production and U.S. annual average price for selected crops and livestock . This forecast assumes a return to trend in crop yields and production following drought-induced production declines in 2012.
For corn, a large anticipated increase over 2012 production levels, coupled with high prices, is expected to result in a record-setting value of U.S. corn production ($81.7 billion) in 2013 as U.S. farmers recover from the drought. Corn inventory is forecast to grow significantly in 2013 as well. See table on quantity and value of annual inventory change for selected crops and livestock . Increases in value of production are also expected for the other major feed crops, especially hay. The value of U.S. soybean production is expected to increase in 2013, but quantity sold during the year is expected to decline, with more production expected to go into 2013 end-of-year inventories. Given a large expected decline in the annual average price of soybeans, and an increase in inventories, cash receipts for 2013 are expected to decline just over 10 percent.
An increase in the annual price for wheat is expected in 2013, but an anticipated decrease in the quantity of 2013 wheat sold and a decline in the value of annual end-of-year wheat inventories are expected to reduce cash receipts (down 2 percent) and value of production (down 4 percent) for wheat in 2013. The quantity of rice sold in 2013 is expected to decline, but rice receipts and value of production are expected to increase as the farm price of rice increases.
Cotton (lint and seed) receipts and value of production are forecast to continue to decline 24 and 28 percent, respectively, in 2013. The annual cotton lint price is forecast to decline for the second year in a row. Forecasts are for declines in cottonseed price and quantity sold.
The value of potato production is expected to decline $226.2 million (5.6 percent) in 2013, as declines in both quantity sold and end-of-year stocks more than offset a predicted increase in price. Despite a predicted increase in dry bean receipts in 2013, the value of dry bean production is forecast to decline $237.6 million (18.4 percent), reflecting a negative change in the value of inventories. The forecast increase for cash receipts for other vegetables in 2013 reflects higher expected prices and an increase in quantity sold of fresh vegetables. A decline in the fruit and tree nut price index is anticipated for 2013. Large expected declines in quantities sold for avocados, sweet cherries, and almonds contribute to an expected decline of 7.2 percent in cash receipts for fruits and tree nuts in 2013. However, large predicted increases in sales of apples and prunes/plums could help offset these declines to some extent.
Estimating Calendar-Year Cash Receipts with Crop Marketing-Year Data
Annual USDA income and value-added estimates, such as cash receipts, are measured in calendar years (January 1 through December 31). Crop marketing years are 12-month periods capturing farm operations' economic activity from the beginning of a new harvest through when the crop is typically sold. The United States has a marketing year for each crop, but different marketing years can exist for the same crop grown in different States. For example, the corn-for-grain crop marketing year for the United States, Iowa, and Illinois is September 1 through August 31, whereas for Florida and Georgia it is August 1 through July 31, and for certain other States it is October 1 through September 30. Marketing years for livestock and for a number of crops coincide with calendar years.
For crops that are marketed across two calendar years (say 2010 and 2011), ERS uses the share marketed in 2010 in its estimate of 2010 cash receipts, while the residual is used in the estimate for value of inventory change for 2010 and again for cash receipts from the pre-harvest portion of 2011. For example, suppose 30 percent of Illinois corn harvested in 2010 is sold in the open market from September through December of 2010 with the remaining 70 percent placed in inventories, and then later sold from January through August of 2011. Cash receipts from open-market sales in 2010 would include the share of Illinois' 2009 harvest that was sold in 2010. The share of the 2010 harvest sold in 2011 would be added to the share of the 2011 harvest sold in 2011 to arrive at Illinois' 2011 cash receipts from open-market sales of corn. To the amount received from open-market sales, ERS adds cash received from "sales" to the Commodity Credit Corporation (CCC) to obtain the calendar-year estimate for cash receipts.
Value of Livestock Production Forecast Up in 2013
The value of livestock, dairy, and poultry production is expected to increase 3.5 percent in 2013, with broilers, cattle/calves, and dairy leading the way. See table on U.S. farm sector livestock cash receipts and value of production . Almost all categories should benefit from expected increases in annual average prices. See table on U.S. annual average price for selected crops and livestock . Declines in inventory during 2013 mean cash receipts in 2013 should be slightly higher than the value of production for cattle/calves and hogs. See table on quantity and value of annual inventory change for selected crops and livestock . Slight declines in the value of production are forecast for turkeys and chicken eggs, both of which are expected to experience small price declines.
Beef sales are forecast down in 2013, while the annual cattle price is forecast to increase from 2012. Several years of cattle herd liquidation, recently exacerbated by drought conditions, have reduced the supply of cattle. Herd expansion will eventually result in an expansion of beef production. However, due to biological lags in the beef production cycle, the initial stages of an expansion cause tighter supplies of feeder and finished cattle. Beef per capita disappearance is expected to decline as are exports of beef and veal. The annual price of hogs is expected to increase in 2013 and with an increase in pork sales, cash receipts and value of production are predicted to rise. Declining pork exports reflect lower shipments to China and Japan (as the yen depreciates).
Despite expectations of a slight decline in sales, per capita use, and exports in 2013, a higher expected farm price translates into anticipated higher (up 6.8 percent) broiler receipts. With higher stock levels going into 2013, lower broiler production expected for the first half of the year, and lower beef production, broiler prices are forecast to increase.
Fluid milk production is expected to decline as reduced dairy cattle numbers more than offset projected increases in milk per cow. For most of 2012 and especially the latter part of the year, dairy cow slaughter was unusually high, mostly due to high feed costs and other factors depressing profit margins. The 2013 average farm price of milk is forecast to rise 73 cents to $19.25/cwt. Feed prices are expected to be down from last year’s drought-induced high levels, which should improve margins for most milk producers.
Farm Production Expenses Forecast Record High in 2013
The projected $19.2-billion increase in total expenses in 2013 continues a string of large year-to-year movements since 2002, and expenses are forecast to reach another record-high, at $352.9 billion (see table on production expenses ). Since 2003, nominal total production expenses will have risen by over $155 billion (79 percent) if forecasts are realized. In inflation-adjusted dollars, 2013 production expenses are expected to surpass the previous peak reached in 1979.
Since 2003, farm-origin expenses and manufactured inputs have increased 106 percent, while other operating and overhead expenses increased 60 percent. Farm-origin expenses and manufactured inputs now constitute 49 percent of total production expenses, up from 42 percent in 2003. In contrast with recent trends, these expenses are set to rise less than other operating and overhead expenses in 2013.
A steady increase in prices rather than higher quantities of inputs is the biggest factor in rising production expenses since 2003. The encompassing prices-paid index for Production Items, Interest, Taxes, and Wage Rates (PITW), calculated by USDA’s National Agricultural Statistics Service (NASS), has risen 78 percent since 2003. By comparison, the Producer Price Index for Finished Goods has risen 36 percent during this period. In 2013, the PITW prices-paid index is forecast to rise 2.2 percent, much less than the 6.4-percent increase in 2012.
In 2013, the major livestock-related expenses are projected to rise by $4.3 billion (5.0 percent), following $11.3-billion and $9.5-billion increases in the previous 2 years. One factor in this slow-down is the expected 1.0-percent decrease in livestock output. Feed expenses will comprise most of the 2013 increase, as they did the prior 2 years. Prices for complete feeds, the heaviest weight in NASS’ prices-paid index, are not expected to fall off as quickly as those for grains and oilseeds because these ingredients were purchased at higher prices earlier in the year. On the demand side, grain-consuming animal units are forecast down 2.0 percent in the 2012 feeding year, most of which lies in calendar year 2013.
The increase in livestock and poultry purchases is also expected to be slower in 2013. That these expenses will rise at all is paradoxical. Cattle dominate this expense category and returns for cattle feeders and packers have been negative for some time due mainly to high feed costs. Yet, prices for feeder steers continued to rise through mid-2012 and their annual average price is forecast to increase in 2013, while net placements in feedlots are expected to decline only 0.4 percent. The primary reason for this situation is the continuing shrinkage in the cattle inventory. Total supply is forecast to be down 2.1 percent in 2013.
Despite a projected 13.5-percent increase in crop output, the principal crop-related expenses are also expected to rise more slowly in 2013. Together, they are forecast to increase $656 million, with seed and pesticide expenses rising and fertilizer expenses declining minutely. During the last 2 years, these expenses increased $11.3 billion, of which fertilizer accounted for $5.6 billion. One factor in the forecast of these expenses--acres of field crops planted--is forecast to fall 0.7 percent in 2013.
The upward movement in the prices-paid indexes of these crop expenses has been the major reason for their increases during the previous 2 years. In 2013, the prices-paid index for seeds is forecast to rise 3.1 percent, for fertilizer 0.2 percent, and for pesticides 2.7 percent. Two factors common to the fertilizer and pesticide indexes--the marketing-year average price of corn and refiners’ acquisition cost (RAC)--are forecast to decline in 2013. The fertilizer price index has also leveled off as the price of natural gas, a major material in nitrogen fertilizers, has fallen over the last 2 years.
Between 2003 and 2011, the annual average prices-paid index for fuels and oils rose 223 percent and expenses increased $9.0 billion (137 percent). The fuels/oils expense in 2012 is forecast to have risen more moderately because of a decline in RAC. In 2013, fuel and oil expenses are forecast to decrease around $250 million (1.5 percent) due to an expected 6.7-percent decline in RAC and the fall in planted acres.
A return to trend yields in 2013 will cause a substantial increase in crop and total output in 2013, which is expected to cause unusually large increases in marketing, storage, and transportation expenses and miscellaneous expenses. The latter expense will also be hiked by an expansion in crop insurance premiums, particularly net Federal Crop Insurance Corporation premiums.
Payments to Stakeholders Rise
Although a claimant of net value added, payments to stakeholders--hired labor, net rent to nonoperators, and interest--do not generally track movements in it. Payments to stakeholders and net value added can even move in opposite directions, as occurred in 2011 and 2012. The year-to-year consistency in payments to stakeholders follows from the fact that stakeholders do not share the risk of equity holders. In 2013, payments to stakeholders are forecast to rise $4.8 billion (9.4 percent) and to constitute 31 percent of net value added, more than in 2012.
In 2013, total labor expenses are forecast to rise $3.0 billion (10.8 percent) as a result of a projected 2.3-percent increase in wage rates and the expected 7.6-percent increase in total output. Employee compensation for hired labor, which is expected to rise 12 percent, accounts for almost all of this projected increase. Output on the types of operations that employ the most labor—vegetables, fruits and nuts, greenhouse/nursery, and dairy—is expected to increase slightly in 2013. Feed grain and oilseed production is expected to use more hired labor than usual because outputs are expected to be up 34 percent and 8 percent respectively.
Net rent to nonoperators in 2013 is forecast to rise $1.6 billion (11.9 percent). Cash rent is forecast up 7 percent in line with a more than 7-percent increase in real estate values. Share rent is forecast up 11 percent in line with the expected increase in crop value of production. Government payments to landlords are forecast to fall slightly. Federal Crop Insurance Corporation (FCIC) indemnities to landlords are expected to increase significantly as 2012 crop-year indemnities continue to be paid out in calendar year 2013.
Total interest expenses in 2013 are forecast to rise $0.4 billion (3.0 percent) as the result of a $1.2-billion (22.3-percent) increase in nonreal estate (short-term) interest expenses and a $0.8-billion (8.7-percent) decrease in real estate interest expenses. Debt and interest rates are discussed in the Assets, Debt, and Wealth section.
Government Payments Forecast To Remain Steady in 2013
Government payments paid directly to producers are expected to total $10.9 billion in 2013 under current law, as applied by USDA’s program agencies (see table on government payments ). This payment level is largely unchanged from 2012. Direct payments under the 2013-crop Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $4.94 billion for 2013. Strong crop prices in 2013 are expected to result in only about $15 million in price-based commodity program payments. These payments reflect final 2011-crop ACRE payments for rice and 2012-crop ACRE payments for other commodities.
The Milk Income Loss Contract (MILC) program was reinstituted in the Farm Act extension that was included in the American Taxpayer Relief Act of 2012 passed by Congress and signed by the President at the beginning of January 2013. This program compensates dairy producers when domestic milk prices fall below a specified benchmark price. Under this extension, beginning in September 2013, the program's payment rate and annual volume of covered milk production are reduced and the feed adjustment factor is increased. As a result, dairy producers are expected to receive $290 million in MILC payments in 2013, a 37-percent decline from 2012.
Tobacco farmers and quota holders are expected to receive $641 million from the Tobacco Transition Payment Program (TTPP) in 2013. Payments reported here include both CCC payments and lump-sum payments. Begun in 2005, this program provides annual payments over a 10-year period to eligible quota holders and producers of tobacco. The TTPP will expire after making final payments in 2014.
Conservation programs include all conservation programs operated by USDA’s Farm Service Agency and Natural Resources Conservation Service that provide payments to producers. Estimated conservation payments of $3.7 billion in 2013 are largely unchanged from 2012. Although total Conservation Reserve Program (CRP) acreage has declined in recent years, CRP outlays have remained roughly constant. This is due to a higher proportion of newly-enrolled acreage being devoted to partial-field practices, resulting in fewer acres covered at higher payment rates per acre.
Supplemental and Ad Hoc Disaster Assistance payments are forecast to be $1.26 billion in 2013, a 22-percent increase from 2012 levels. Almost 90 percent of expected 2013 payments are from the Noninsured Assistance Program (NAP) and Supplemental Revenue Assistance Program (SURE). NAP payments of $250 million are expected to be made to livestock and specialty crop producers for which no commodity insurance program is available.
Under the SURE program, the bulk of the expected $870 million paid to producers cover the commodity losses incurred during the 2011 crop year. The time lag for receiving a SURE payment is primarily due to the fact that the crop year is defined by a commodity's harvest cycle, such that it often overlaps two calendar years and SURE payments are made after a current crop year ends. Given the severity of the 2011 drought, 2013 SURE payments represent a 55-percent increase over 2012’s payments. The Farm Act extension only covers disaster relief payments for covered losses incurred prior to October 1, 2011. Thus, drought-related commodity and livestock losses incurred more recently are not covered.
Revised 2012 Net Farm Income Forecast: November 2012 Versus February 2013
Our February 2013 forecast of the 2012 value of crop production is $0.3 billion (0.14 percent) lower than the forecast we released in November 2012, while our forecast for livestock value of production rose $2.4 billion (1.41 percent).
The major driver for the decline in value of crop production was a large decline in the forecast value of crop inventory adjustment, with the three largest declines for soybeans, corn, and cotton lint. Total 2012 crop cash receipts are $3 billion higher in the February forecast. Cash receipts increased for all major crop categories except feed grains. Thus, the overall change in 2012 crop value of production since November is a shifting of sales from 2013 back into 2012, raising 2012 crop cash receipts while reducing the change in value of crop inventory.
Within livestock, cash receipts for cattle, calves, and broilers were the major contributing factors to the upward revision of $2.4 billion in the 2012 forecast. All three commodities had their annual average prices revised upward, and the forecast of 2012 sales for calves and broilers increased as well. Beef and broiler production, beef per capita disappearance, and beef and veal exports forecast for 2012 have also been revised upward since November.
The 2012 forecast of total expenses is down $354 million (0.1 percent) from the November 2012 forecast, due to small changes in individual expense categories. Most of the changes were the result of movements in prices paid indexes (PPIs). For the February 2013 forecast, we use the full 12-month series of PPI’s for 2012. The largest absolute change is in 2012F feed expenses, which dropped $662 million (1.4 percent) because of a 1.4-percent fall in its PPI. The 2012 forecast of property taxes is down $523 million (4.2 percent) from November because its formula is recursive and 2011’s PPI was revised upward, lessening the change from 2011 to 2012. The 2012 forecast of net rent to nonoperators fell $347 million (2.5 percent) between the November and February releases due to a reduction in estimated FCIC payments to landlords. The fuels/oils expense forecast was revised downward by $229 million and forecast fertilizer expenses fell $146 million because of drops in their respective PPIs.
The $480-million increase in forecast real estate interest expenses for 2012 is the result of a $6.6-billion increase in farm real estate debt for 2012. A $212-million increase in 2012F nonreal estate interest expenses is due to higher estimated interest rates on this type of debt. Forecast capital consumption increased $406 million due to an increase in the value of operator dwellings and increases in both PPIs used in the forecast of building capital replacement. The 2012 forecast total labor expense increased $271 million (1.0 percent) between November 2012 and February 2013 because the wage rate PPI rose nearly that much.
Farm Income Forecasts Grow More Refined Over 19 Months
The periodic farm income forecasts and estimates published by ERS for a particular year (5 over a span of 19 months) can vary markedly from one release to the next. For example, the first forecast of 2012 income (in February 2012) has undergone refinement as new information has become available. Release dates for updated forecasts correspond with the availability of seasonal data and annual survey results. For example, the August update of annual crop values benefited from preliminary output and yield numbers as reported by producers in the field. Likewise, because the prior-year's (2011's) forecast is converted to an estimate in August, production expenses are extrapolated from these new estimates and several months of current-year input price indices in future updates. Additional refinements in the August 2012 and the November 2012 releases incorporate harvest, sales, and inventory data. The final forecast of 2012 farm income is released in February 2013. Ultimately, an estimate of 2012 farm income will be published in August 2013.
Individual components of the farm income accounts adhere to different timetables and are subject to varying degrees of uncertainty. For instance, crop inventory adjustment is a residual component of total supply (production and beginning-of-year stocks) and use (domestic and exports). Farm household income is contingent on many factors (amount of off-farm work hours and wage rates) that transcend crop and livestock numbers. Government payments-which are a function of prices, production, eligibility rules, and ad hoc disaster legislation-are also hard to forecast with any certainty, and that uncertainty compounds the margin of error that measures like net cash income are subject to from first forecast to final estimate.