After adjusting for inflation, 2013’s net farm income, forecast at $128.2 billion, is expected to be the highest since 1973, according to the USDA's Economic Research Service.
"American agriculture continues to endure an historic drought with tremendous resolve," Agriculture Secretary Tom Vilsack said in a statement regarding the report. "I am heartened that our farmers' keen business sense is continuing the recent trend of strong farm finances, with farm equity set to reach another record high in 2013."
A return to trend yields would lead to record crop production levels and result in substantial year-end crop inventories, the agency says, leading to higher net farm income. This measure goes beyond cash income to include the value of inventory change and other noncash items.
Net cash income – which measures the difference between cash expenses and the combination of commodities sold during the calendar year plus other sources of farm income – is forecast at $123.5 billion, down almost 9% from 2012. Even so, 2013’s forecast would be the fourth time net cash income, after adjusting for inflation, has exceeded $100 billion since 1973.
The projected $19.2-billion increase in total expenses in 2013 continues a string of large year-to-year movements since 2002, and expenses are forecast to establish a record-high. Rent, labor, and feed are the expense items expected to increase the most in 2013.
Farm sector assets, debt, and equity are all forecast to increase in 2013. As in the last several years, increases in farm asset value are expected to exceed increases in farm debt, with farm real estate the main driving force. Confirming the strength of the farm sector's solvency, both the debt-to-asset ratio and debt-to-equity ratio are expected to reach historic lows.
Median farm household income forecast up in 2012, 2013
Projected median total farm household income is expected to increase by 1.2% in 2012, to $57,723, and by an additional 1.9% in 2013, to $58,845. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. Despite high prices for many crops, 2012 was no exception, with median farm income projected to be -$2,799. Most farm households earn all of their income from off-farm sources--median off-farm income is projected to increase by 3.4% in 2012, to $55,229 and by 3.9% in 2013, to $57,378.
Vilsack says report shows producers' resiliency, productivity
Vilsack said the commitment of American producers to embrace innovation and adapt to new challenges has helped fuel growth for American agriculture over the past five years, and though the report is positive, it still speaks to the need for a new farm bill.
"To help all farmers and ranchers continue their efforts in the years ahead, and to ensure the certainty of a strong safety net, it is critical that Congress act on a multiyear, comprehensive Food, Farm and Jobs Bill as soon as possible," Vilsack said.