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Net farm income forecast up for 2011

An updated forecast by the USDA’s Economic Research Service shows that net farm income for 2011 will reach $103.6 billion, up $24.5 billion from 2010. All three measures of farm sector earnings (net farm income, net cash income, and net value added) are forecast to rise more than 20 percent in 2011.

Net farm income, according to ERS, reflects income from production in the current year, whether or not sold within the calendar year, and is a measure of the increase in wealth from production. The 2011 forecast of net farm income is the second highest inflation-adjusted values recorded since 1973.

Overall, the value of the farm sector’s equity (net worth) is forecast to rise 7.1. percent in 2011.

The agency estimates that crop receipts will rise over 19 percent in 2011, with large increases expected across a number of crop categories. In addition, livestock receipts are expected to rise nearly 16 percent, led by strong sales of dairy, meat animals and turkeys.

“Many different crop and livestock categories are expected to achieve record high sales,” according to researchers.

“Feed crop receipts are expected to increase almost 37 percent, achieving a record level in 2011. Sales of corn for grain, which are expected to account for almost 86 percent of 2011 feed crop receipts, are expected to increase over 38 percent in 2011. While the quantity of corn sold in 2011 is expected to decline less than 5 percent, this will be more than offset by an almost $2-per-bushel increase in price. Corn exports are suffering as rising U.S. corn prices have made feed-quality wheat, a substitute, more competitive. Tight U.S. corn supplies, due largely to a drought in Southern-producing States, have hurt U.S. corn exports.”

Total expenses are forecast to increase $32.5 billion (11.4 percent) in 2011, exceeding $300 billion for the first time.

In addition, median total farm household income is expected to increase by 1.9 percent in 2011, to $55,405. Most farm households earn the majority of their income from off-farm sources and off-farm income is expected to increase by 3 percent in 2011, to $51,889.

In 2010, median total farm household income was $54,370, up 4.1 percent from 2009 and 1.2 percent above the 5-year average for 2006 to 2010. Median farm and off-farm income was $-2,020 and $50,385, respectively, both higher than in 2009.

Government payments made directly to producers are expected to total $10.2 billion in 2011, a nearly 18 percent decrease from the $12.4 billion that is estimated to have been paid out for 2010. Direct payments under the Direct and Countercyclical Program (DCP) and the Average Crop Revenue Election Program (ACRE) are forecast at $4.71 billion for 2011.

Direct payment rates are fixed in legislation and are not affected by the level of program crop prices. However, the 4.4-percent decline in direct payments forecast in 2011 relative to the 2006-10 average is due to producers having enrolled in ACRE program. Authorized under the Food, Conservation and Energy Act of 2008, ACRE provides revenue insurance to producers in exchange for a 20-percent reduction in their annual direct payment allotments beginning with the 2009 crop year.

The decreased forecast represents the smallest amount paid to producers since 1997, but reliance upon government assistance is not equal throughout the nation — it is relatively low in Iowa and the Midwest, but relatively high for Texas and Oklahoma.

Image has not been found. URL: http://www.ers.usda.gov/Briefing/FarmIncome/Images/Gpncfi/Gpncfi.gif

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