2013 farm income still highest since 1973, but...

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The USDA forecast 2013 net farm income to be highest since 1973, but debt is also forecast to increase.

Coins higher According to the latest “Farm Sector Income” report released on Tuesday, the USDA forecasts net farm income to top $131 billion in 2013, up 15 percent from 2012.  This comes as substantial year-end crop inventories are expected as a result of a record corn harvest.

Total expenses are also expected to climb by $10.9 billion to $352 billion. Production expenses are forecast to be the highest on record.  

Meanwhile, the USDA projects debt to increase in 2013, primarily due to farm real estate debt. Farm real estate debt is forecast at $180.2 billion, putting it 4.2 percent above 2012’s estimates. Non-real estate debt is expected to increase by 2 percent from last year.

“Over the past few years, the amount of operating capital needed for most farming enterprises has risen dramatically, along with production expenses and capital (machinery and equipment) purchases.  Much of the rise in the need for operating capital is a result of the rise in input prices. Continuing price level increases have led to the average size of both production and operational loans increasing in most areas of the country,” the USDA said in the report.

Assets and equity also were forecast to increase this year, helping to push the debt-to-asset and debt-to-equity ratios to historic lows.

The USDA sees farmland values continuing to increase, given the relative strength of commodity prices, accommodating interest rates, and expectations of continued favorable net returns both from the market and from government programs, including crop insurance.

The USDA also sees the average net cash farm income to:

  • Jump by 23 percent for dairy farm businesses as milk prices continue to climb higher than in 2012.
  • Climb 7 percent for hog farm businesses thanks to increasing production levels and hog prices.
  • Drop 4 percent for beef cattle farm businesses. Despite lower output from beef cattle farm businesses due to reduced herd size, higher prices for cattle and calves are expected to result in marginally higher beef cattle receipts.

Click here to read the full report.  

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Batavia, NY  |  November, 27, 2013 at 11:32 AM

So after all these good years that we have had, farmers are deeper in debt. Not a very smart move. Now that we are going into a few years of lower farm income and with rising interest rates when the Fed ends their money give away, it will be a different environment. So, what will happen? Well, we will hear about all the failing farms and the farm groups will cry to the government to save them. But at least the farms that refused to pay the bloated land prices last year will get some “cheap” land at the bankruptcy auction. So there is a good side to this for the smart farmers.

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