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Grain prices have farm incomes surging
Despite sinking estimates for this fall's corn and soybean crops, surging crop prices have average farm incomes heading higher for 2011, according to new information from USDA.
The USDA Economic Research Service (ERS) released its Farm Income and Costs: 2011 Farm Sector Income Forecast this week, a summary of public- and private-sector financial information for farms and farm businesses. It shows just how much the surge in grain market prices should mean to crop farmers' bottom lines.
For 2011, USDA pegs net farm income at $103.6 billion for 2011, up almost $25 billion from last year, a 31% increase. That helped build net value, which increased by $27.1 billion to $157 billion nationwide. Net cash income for farm businesses (a group including "intermediate and commercial operations, including nonfamily farms) at just over $83,000. That's up 17% from the 2010 estimate of just over $71,000.
"With prices expected to approach record levels for major crops, a large part of the improvement in earnings for 2011 will be on the crops side," according to USDA's report.
"These are not just records, but records that are substantially higher than we've seen before," says Purdue Extension agricultural economist Chris Hurt. "USDA estimates producers have put 15% more into the cost of inputs. So, we have crop revenues up 20% and livestock up 16%. That says profit margins expanded in 2011."
But, income guesses aren't bullish across the board. Those gains for crop farmers will be at the expense of livestock producers. "Higher crop prices will cut into profit margins for the livestock sector that had just recovered from major losses suffered when feed costs started escalating in 2007," according to USDA.
And, Hurt says that trend's expected to continue next year. "We see high feed costs, and right at this point we're looking for milk and poultry prices to come down a bit, while beef and pork prices will stay fairly stable," he says. "That says revenues may be down somewhat on livestock in 2012, but costs -- particularly feed -- will be up. We think the animal profit margins will be very close to flat with no real profit potential across the livestock sector in 2012."
That livestock profitability decline is expected to touch the grain sector, too. But, things will still stay well into the black, Hurt says. Grain markets will likely slide and input costs will rise, but neither will shift enough to gut profits.
"The 2012 crops should still be profitable -- just not quite as profitable as 2011," he says. "The 2011 profitability and incomes likely will hold as records for several years to come."