USDA Increases Net Farm Income Forecast

Despite low prices, the state of the farm economy continues to set historic records. The net cash farm income for 2004 is forecasted at $77.5 billion, an increase of nearly $9 billion compared to 2003.

Agriculture Secretary Ann Veneman shared the updated information in an address to reporters on Tuesday. She says several factors contributed to the income increasing including a growing economy and job creation, strong demand, record exports and a focus on opening new markets.

Farmers cash receipts should reach another record this year--$233.4 billion. This is $22 billion over 2003. Despite bovine spongiform encephalopathy (BSE) and other animal disease issues, the majority of that increase is from increased livestock exports, $16 billion to be exact, compared to the $6 billion increase in crop exports.

Net household income for the average farm is expected to rise to $70,675 in 2004, about 3% higher than its 2003 level. Net farm income is expected to grow by over 10% while net nonfarm income is expected to rise over 2%. Households associated with larger farms are expected to realize the largest increases in net household income.

The ag trade balance has come under scrutiny recently with several months experiencing a trade deficit. USDA Chief Economist Keith Collins says the agriculture trade surplus is shrinking for 2004, but is a "story not of competitiveness but of consumption."

U.S. imports of foreign ag goods not produced in the U.S. account for the growing number of agricultural imports. Over 50% of the increase in imports are horticultural products, Collins explains. Consumers want a variety of foods, particularly fresh foods, that can't be grown year-round in the U.S. Noncompetitive products such as cocoa, coffee, and wines and beer are also adding to the influx of imports flowing into the United States.

USDA is projecting a $62 billion in farm exports. Collins says when you're running a larger overall trade deficit, it does impact the overall economy. "In the near term the deficit leads to downward pressure on the dollar, promoting exports," he reminds.

To read the Economic Research Service's Agriculture and Income Finance Outlook, click HERE. (This requires your computer to have a free application of Adobe Acrobat Reader.)