US farmers are heading for a year of record farm profits, buoyed by higher receipts for both livestock and arable crops.
Latest estimates from the US department of agriculture point to a 2007 net farm income of $87bn. That is up $28bn on last year and $30bn above the 10-year average.
“The change in cash receipts is surprisingly balanced between livestock and crops,” says American Farm Bureau Federation senior economist Terry Francl.
Livestock cash receipts are expected to increase 17% to $140bn on the strength of improved cattle, pig, poultry and dairy prices. Crop cash receipts are estimated at $136bn, up 13.5% due to higher wheat, corn and soybean prices.
“Wheat prices continued to rise in 2007 due to drought conditions that reduced supplies in several wheat producing countries, and world stocks at their lowest in 25 years,” says the latest USDA report.
Government payments to farmers are forecast to be down slightly in 2007 due to the higher market prices. Total subsidies are put at $13.6bn, including $5.5bn in direct payments, $3.1bn in conservation payments and $2bn in emergency payments.
“But the glass is only half full for America’s farmers, since farm production costs are also escalating,” says Mr Francl.
Total cash farm expenses have risen 9% to $222bn, with fuel and oil prices up 4.5% and fertilizer up 17% in 2007.
“This is the tail end of a cumulative cost drive for energy-related inputs that, over the past four years, has increased fuel costs 71% and fertilizer costs 56%,” says Mr Francl. “Unlike income and cash receipts, which fluctuate up and down over the years, most expense categories tend to compound higher year after year.”
The farm sector’s net value added to the US economy is forecast at $135bn in 2007, up $31bn from 2006.