Farm Business Net Cash Income Expected To Decline in 2013
Average net cash farm income (NCFI) is forecast at $76,000 for all farm businesses* for 2013, a decline of 12 percent from 2012 (see table ). This decline is in line with the sectorwide forecast for NCFI, which represents the amount of cash available to service debt, pay family living expenses, and make investments. It is not a comprehensive measure of profitability, however, since it does not account for changes in inventory, accounts payable, accounts receivable, and depreciation.
Most farm businesses specializing in program crops are forecast to experience a 7- to 10-percent decline in NCFI in 2013, with larger declines (28.6 percent) anticipated for cotton and rice. Crop receipts are forecast to decline slightly for almost all program crop farm businesses, but cotton and rice farms will likely see a larger decline in crop receipts of 5 percent due to lower cotton acreage and prices. For some producers, 2012 insurance indemnities will be paid in 2013, boosting NCFI.
Cash expenses, forecast to increase 3-4 percent for farm businesses specializing in program crops in 2013, are driving the overall decline in NCFI. Rent expenses are expected to increase by as much as 6 percent and make up 10 to 20 percent of expenses. Seed; fertilizer, lime, and chemicals; and fuel together make up around half of all cash expenses for farm businesses specializing in program crops. Seed expenses are forecast up 2.5 percent in 2013; fertilizer, lime, and chemical expenses are forecast down 0.4 percent; and fuel expenses are forecast down 1.5 percent in 2013.
Specialty crop farm businesses (fruits, vegetables, and nursery/greenhouse) are forecast to experience a decline in average NCFI of more than 15 percent in 2013. Crop receipts are expected to be slightly less than in 2012, while total cash expenses are forecast to increase by almost 7 percent. Labor expenses, which make up over a third of all cash expenses for specialty crop farms, are forecast to increase 11 percent due to increasing wages and output. Other field crop farm businesses (sugar crops, hay, silage, trees, and woody crops) are forecast to experience a 16-percent decrease in average net cash income in 2013.
Despite higher prices and receipts than in 2012, net cash income for livestock farm businesses is expected to decrease across all specializations in 2013 due to expenses increasing by 5-6 percent. Feed costs are forecast to rise more than 6 percent, and make up 51 percent of expenses for dairy, 42 percent for hogs, 35 percent for poultry, and 19 percent for beef cattle farm businesses.
After a projected 49-percent decline in average NCFI in 2012, dairy farm businesses are forecast to experience a further 14-percent decline in 2013, even though milk prices are expected to be 4 percent higher than in 2012. Despite higher prices, lower output due to reduced herd size will leave beef cattle receipts only slightly higher than in 2012. With production cost increases, average NCFI for beef cattle farm businesses is expected to decline 12 percent in 2013. Although hog prices are projected to recover after declining in 2012, NCFI for hog farm businesses is projected to decline nearly 8 percent in 2013. The hog situation is similar to beef cattle, where expenses are forecast to increase more than receipts and total output remains similar to 2012. With strong prices for broilers predicted to continue in 2013, average NCFI for poultry and egg farm businesses is forecast down only 2 percent from 2012.
Average NCFI is forecast to decline for all farm typologies, specializations, and regions in 2013, but there is considerable variation in anticipated farm business performance across these categories relative to the past 4 years. Commercial operations*, which represent over 80 percent of production, are forecast to earn almost the same average NCFI in 2013 as their 2009-2012F average, while intermediate farms are forecast to experience a 14-percent increase in net cash income relative to their 2009-2012F average. However, intermediate farms are projected to experience larger year-over-year declines (2013 versus 2012) in NCFI than commercial farms.
Other than cotton and rice farm businesses, farm businesses specializing in crops are forecast to have similar or higher NCFI than their 2009-2012F averages. Farm businesses specializing in poultry and beef cattle are expected to have considerably higher NCFI in 2013 than their 2009-2012F averages, while hog and dairy farm businesses are expected to experience declines.
Farm businesses in some regions (see more on the ERS resource regions) are forecast to experience substantial increases in NCFI in 2013 relative to their 2009-2012F averages, while a few regions are expected to experience declines.
- Increases in mixed grain, wheat, and cattle NCFI relative to 2009-2012F favor farm businesses in the Northern Great Plains, Prairie Gateway, and Basin and Range.
- The forecast decline in dairy NCFI is contributing to declining NCFI in the Northern Crescent and Fruitful Rim relative to 2009-2012F averages.
- Declining cotton and rice farm business NCFI is contributing to the expected decrease in NCFI in the Mississippi Portal.
- Large declines in hog farm NCFI and weak gains in corn and soybean farm business NCFI are contributing to the expected decrease in net cash income for Heartland farmers.
- Cattle and poultry gains, relative to 2009-2012F NCFI, are driving the increase in net cash income in the Eastern Uplands and Southern Seaboard.
* Farm businesses are defined as operations with sales of over $250,000 (labeled "commercial") or smaller operations where farming is reported as the operator's primary occupation (labeled "intermediate"). Approximately 13 percent of U.S. farms are commercial and 29 percent are intermediate. "Rural residence farms" comprise the remaining 58 percent of operations. These are small farms operated by those whose primary occupation is something other than farming or by retirees.