2011 net farm income forecast up nearly 20%

Washington-USDA’s Farm Financial Forecast for 2011, released on Feb. 14, projects net farm income to be $94.7 billion in 2011, up $15.7 billion (19.8 percent) from the 2010 forecast, despite a $20 billion jump in production expenses. The 2011 forecast is the second highest inflation-adjusted value for net farm income recorded in the past 35 years, USDA said. Cash receipts are expected to increase 9.1 percent, with cotton, soybean, wheat, and corn receipts showing the largest gains. “Today’s report predicting strong financial performance in the agriculture sector for 2011 is good news for producers and indicates that economic improvement is underway in much of rural America,” said USDA Secretary Tom Vilsack, noting that the nearly 20 percent hike in farm income is the second highest figure since the mid-1970s. “Potential record or near record prices for commodities like corn, wheat, soybeans, and cotton reflect the fact that our trading partners continue a strong demand for food and fiber produced by America’s farmers.” The report said the value of the farm sector’s equity (net worth) is forecast to rise 6.8 percent in 2011, due largely to an estimated 6.3 percent increase in the value of farm business real estate. Farm asset values are expected to have the largest percentage increase since 2007. With modest increases in debt, the report said inflation-adjusted equity should exceed 2007’s peak levels. The farm business sector’s debt-to-asset ratio is expected to decline from 11.3 percent in 2010 to 10.7 percent in 2011, and the debt-to-equity ratio is expected to decline from 12.8 percent in 2010 to 12.0 percent in 2011. USDA said this indicates that the farm sector’s solvency position remains strong. The report also projected average family farm household income in 2011 to be up 4.0 percent over 2010, to $86,352. Both farm and off-farm incomes are forecast to be up in 2010 and 2011, compared to the previous year and to the 5-year average for 2005-09. In 2011, 12.9 percent of the income of farm families is expected to be from farm sources, with the rest from off-farm income. Farm income is forecast to average $11,174 in 2011, while average off-farm income is forecast to be $75,178. “The increase in income is accompanied by a corresponding drop in government payments to the lowest figure since 1997,” Vilsack said. “This shows that the safety net, which helps producers in times of low commodity prices, is working as intended.” While noting the report’s overall positive news, particularly for producers of grains and fiber, Vilsack warned that farmers “continue to face an increase in expenses for key inputs, including feed, fertilizer, and fuel.” Additionally, after a strong recovery in 2010, the report projects a revenue decline for livestock farm businesses in 2011 and continued income and loan repayment concerns for dairy farmers, with higher feed costs as a primary factor. “Still, the report’s projection that net cash farm income will exceed the recent historical high of 2005 is an indication that America’s overall farm economy is improving, especially in the Heartland and in the Mississippi River region,” Vilsack continued. “The Obama Administration has focused on helping farmers and rural small businesses find profitability in the marketplace and success in the global economy. Today’s report is an indication that effort is succeeding.”