Big drop in farm earnings hurt the Midwest
It’s bad news for farm incomes – while the national average income grew a modest 1 percent from April to June, the Commerce Department painted a different picture of the country's key agriculture-producing states.
According to The Wall Street Journal, farm earnings were down more than 14 percent across the nation, with the Midwest taking the biggest hit. Personal income shrank in Nebraska, Iowa and South Dakota.
Commerce Department economist Carrie Litkowski told The Wall Street Journal that the fall in farm earnings reflects a decline in crop output, possibly due to lower commodity prices. Inventories also have bounced around after Central and Southern Plains and much of the Corn Belt were hit by a severe drought in 2012.
While the drought wiped out stocks, farmers spent much of the first quarter of 2013 rebuilding. However, this pace slowed during the second quarter.
The USDA suggests that the quarterly dive may be more of a quirk than a trend and expects the region to see a third year of near-record revenues. Last month in its “Farm Sector Income Forecast,” the USDA showed farm income to increase by 6 percent to $120.6 billion in 2013.
“It may not be record but I think we’ll have a pretty strong year all things considered,” said American Farm Bureau Chief Economist Bob Young.
However, farm production expenses are also expected to climb. Since 2003, expenses for both farm and manufactured inputs have increased by 106 percent, while other operating and overhead expenses have increased 60 percent. Farm-origin expenses, such as feed and purchased livestock, and those for manufactured inputs, such as chemical fertilizers and pesticides, now account for nearly 50 percent of total production expenses. Read the report here.
Nearly 90 percent of farm households are earning an income from non-farm sources in addition to their on-farm work.