usda outlook for the 2012 u.s. farm economy

2012 USDA Ag Outlook Forum

USDA Outlook for the2012 U.S. Farm Economy

Timothy Park & Kevin PatrickFarm and Rural Business Branch

Resource and Rural Economics Division


SUMMARY

• Agriculture’s strong financial performance is projected to ease in 2012, with declines for all three measures of sector earnings.

• Net farm income is forecast to fall to $91.7 billion in 2012, down 6.5 percent from the 2011 forecast, but still the second highest nominal value on record.

• Increases in receipts for corn, most other feed grains, and peanuts are

predicted to offset declines in wheat, hay, vegetables and melons, fruits and tree nuts.

• Cattle/calves and broilers are forecast up over 3 percent.

• Total expenses are projected to increase $12.5 billion (3.9 percent).

• Farm asset values are likely to increase by more than 5 percent for the third consecutive year. Debt is expected to rise 3.8 percent. The inflation-adjusted value of the farm sector’s equity is expected to establish a new record high.


050

100150200250300350400450

$ billion

Value of agricultural sector production expected to increase $5.7 billion in 2012

Total value of production Crop Livestock

Source: USDA, ERSNote: 2011, 2012 forecasts


0

50

100

150

200

250

300

350

400

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012F

$ billion2005=100

Real value of projected agricultural sector production in 2012 is second highest in 30 years

Total value of production Crop Livestock



Corn Soybeans Fruits and nuts Vegetables Wheat Cotton0

10

20

30

40

50

60

70

Receipts for selected crops, 2008-2012F

2008 2009 2010 2011F 2012F

$ billion

Source: Economic Research Service, USDA F = forecast

Corn and soybean prices are

forecast to be 8.3 percent and

1.6 percent higher than in

2011. Corn receipts are

expected to establish a new

nominal record. Soybean

receipts are expected to reach

a 5 year high. Wheat receipts are forecast

down 13.6 percent in 2012 to

$12 billion due to a substantial reduction in U.S.

wheat prices. Receipts for fruits & nuts and

vegetables each expected to

be down about 5.5 percent.


Cattle and calves Dairy Broilers Hogs0

10

20

30

40

50

60

70

Receipts for selected livestock products, 2008-2012F

2008 2009 2010 2011F 2012F

$ billion


The 2012 receipts forecast for cattle and hogs would set

new nominal highs. Exports have been a strong

contributor to gains in livestock receipts.

Broiler receipts are forecast to increase over 3 percent in 2012 even with lower broiler

meat production.

Driven primarily by lower forecast milk prices, dairy receipts are expected to decrease over 6 percent.


Farm businesses represent almost 850,000 farms and account for 94 percent of

production

Farm Businesses

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Rural Residence Intermediate Commercial

Farms Production Assets Debt

Small farms with sales less than

$250,000 whose operators report farming as their

major occupation.

Farms with sales greater than $250,000 and

farms organized as nonfamily

corporations or cooperatives.

Small farms whose operators report they are retired or they had a major

occupation other than farming.

1,344,031

577,028

270,795

Photo by: Daniel Marti

Source: USDA, ARMSNote: 2011, 2012 forecasts

2012 USDA Ag Outlook Forum Source: USDA, ARMSNote: 2011, 2012 forecasts

Cotton and rice

Mixed grain Corn Specialty crops

Wheat Soybeans and peanuts

Other field crops

0

50

100

150

200

250

300

Average net cash incomes for 2012 are expected to remain above 2008- 2011F averages for crop farm

businesses

2008 2009 2010 2011F 2012F

$ thousands

The projected decrease in average income for corn, soybean, and mixed grain farm

businesses ranges from 7-9

percent in 2012. Cotton and

rice and specialty crops farm

businesses have the larger

projected decreases in income

ranging from 11-27 percent.

Average net cash income for

farm businesses is projected to

be $66,900 in 2012 , a 17 percent decline from the 2011

forecast of $80,600.

2012 USDA Ag Outlook Forum Source: USDA, ARMSNote: 2011, 2012 forecasts

Hogs Dairy Poultry Beef cattle0

50

100

150

200

250

300

350

400

450

Average net cash income for livestock farm businesses expected to recede in 2012

2008 2009 2010 2011F 2012F

$ thousands

Average net cash income for

beef cattle farm businesses is

expected to decrease 21 percent

in 2012, but should be almost

5.5 percent higher than the 2008-11 average.

After substantial gains in net

cash income in 2010 and 2011,

dairy farm businesses are

forecast to experience an almost

27 percent decline in 2012.

With higher prices projected for

feed (42 percent of total cash

expenses), average net cash

income is projected to fall by

almost 17 percent in 2012 for

farm businesses that specialize in poultry.


Incomes are expected to be up in the Prairie Gateway and the Northern Great Plains for 2012 compared to 2008-2011

average

2012 Farm business net cash income forecast compared with 2008 – 2011F average

Fruitful Rim-14.3%

Heartland0.7%

Prairie Gateway

10.3%

Northern Great Plains

12.8%

Basin and Range0.0% Southern

Seaboard-25.6%

Eastern Uplands -37.8%

Mississippi Portal-14.3%

Fruitful Rim-14.3%

Northern Crescent-14.1%

Source: ERS partial model based using the 2010 Agricultural Resource Management Survey (ARMS) and parameters from the sector forecasts. The model is static and therefore does not account for changes in crop production impacts the occurred after the base year. F = forecast

Fruitful Rim-14.3%


1/ All other payments include disaster relief payments, tobacco transition payments, and dairy program payments.2/ Counter-cyclical payments, loan deficiency payments, marketing loan gains, certificate exchange gains, and ACRE payments vary with crop prices.3/ Production flexibility contract payments and direct payments are fixed by legislation.

Source: FSA, NRCS, and CCC F= forecast

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F0

5

10

15

20

25

Government payments forecast up in 2012 to $11 billion

All other payments 1/

Conservation payments

Function of crop price payments 2/

Fixed payments 3/

$ billion


1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2011F

-10

-5

0

5

10

15

20

25

30

35

-100

-50

0

50

100

150

200

250

300

350

Cash expenses expected to continue to climb in 2012Annual percentage change in total cash expenses, 1970-

2012F

Percent increase from previous year

Percent decrease from previous year

Total cash expenses (right axis)

Percent $ billion

1970 2010

1985


Source: Economic Research Service, USDA. F = forecast

Note: Percent change from 2011 to 2012 is indicated at the top of each set of bars.

FeedMisc.LaborFertilizerLivestock & poultry

RepairsSeedFuelsInterestMarketingPesticides0

10

20

30

40

50

60

Changes in expense items, 2011F – 2012F

2011F 2012F

$ billion

4.5%11.3%

4.9%

-0.2%

5.3%0.7%1.3%

3.5%

10.4%

5.3%-0.1%


19871988

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

2011F2012F

0

500

1,000

1,500

2,000

2,500

Real equity expected to establish new record in 2012, value of assets at highest level since 1980

Real farm sector assets, debt, and equity, 1987-2012F 1/Equity Debt Assets

$ billion

1/ The GDP chain-type price index is used to convert current-dollar amounts to real (inflation adjusted) amounts (2005 = 100).


Real farm asset values are projected to increase by almost 4 percent in 2012, led by a rise in real estate values.

After decreasing in 2011, real farm debt is expected to increase by 1.8 percent to $220 billion in 2012.

Nominal farm equity is expected to be up 6 percent to $2.22 trillion. Nominal farm debt is also projected to increase in 2012 to $254 billion, up nearly 4 percent.

2012 USDA Ag Outlook Forum Source: USDA, ERSNote: 2011, 2012 forecasts

2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F0

50

100

150

200

250

-5%

0%

5%

10%

15%

20%

25%

30%

Real debt relatively unchanged since 2008Real farm debt and ratios, 2003 - 2012F

Debt Debt to Asset Ratio (right axis) Debt to Equity Ratio (right axis)

$ billion Percentage


$ billion 2012F Change from 2011

Value agricultural sector production $414.5 $5.7

( - ) Purchased inputs $235.1 $8.5

( + ) Net government transactions -$1.8 -$0.6

= Gross value added $177.7 -$3.3

( - ) Capital consumption $32.5 $0.9

= Net value added $145.1 -$4.2

( - ) Payments to stakeholders $53.4 $2.1

= Net farm income $91.7 -$6.3

Net farm income expected to fall in 2012



Dynamic Production Expenses, 2008 to 2012FDynamic Bubble Charts

X-axis is the percent change from the previous year Y-axis is the dollar change from the previous year Size of the bubble represents the item’s share of total production expenses

2011F saw large production expense increases, smaller increases for 2012 Examine changes over time in these expenses Four years of data on major expense categories

Feed, Livestock & Poultry, Fertilizer


-15% -5% 5% 15% 25% 35%

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14

Production expense changes, 2008

Feed Livestock & poultry Fertilizer & lime

Percentage change from 2007

Dollar change from 2007$ billion


-15% -5% 5% 15% 25% 35%

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Production expense changes, 2011F






-15% -5% 5% 15% 25% 35%

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-2

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Production expense changes, 2012F

Feed Fertilizer & lime Livestock & poultry

Percentage change from 2011F

Dollar change from 2011F$ billion



SUMMARY

• Agriculture’s strong financial performance is projected to ease in 2012, with declines for all three measures of sector earnings.

• Net farm income is forecast to fall to $91.7 billion in 2012, down 6.5 percent from the 2011 forecast, but still the second highest nominal value on record.

• Increases in receipts for corn, most other feed grains, and peanuts are

predicted to offset declines in wheat, hay, vegetables and melons, fruits and tree nuts.

• Cattle/calves and broilers are forecast up over 3 percent.

• Total expenses are projected to increase $12.5 billion (3.9 percent).

• Farm asset values are likely to increase by more than 5 percent for the third consecutive year. Debt is expected to rise 3.8 percent. The inflation-adjusted value of the farm sector’s equity is expected to establish a new record high.


http://www.ers.usda.gov/Briefing/FarmIncome/

• Farm Income and Costs• Overview• 2012 Farm Sector Income Forecast• 2011 Farm Sector Income Estimates• 2010 Farm Sector Income Estimates• Farm Business Income• Assets, Debt, and Wealth• Farms Receiving Government Payments• Data Sources• Recommended Readings• Recommended Data• Glossary • Debt Landscape for U.S. Farms Has Shifted

Sign up for ERS Charts of Notehttp://www.ers.usda.gov/ChartsOfNote/

Briefing Room: Farm Income and Costs



http://www.ers.usda.gov/Briefing/FarmIncome/nationalestimates.htm

http://www.ers.usda.gov/Briefing/FarmIncome/2011farmincomeforecast.htm

http://www.ers.usda.gov/Briefing/FarmIncome/2010incomeaccounts.htm

http://www.ers.usda.gov/Briefing/FarmIncome/Businessincome.htm

http://www.ers.usda.gov/Briefing/FarmIncome/Wealth.htm

http://www.ers.usda.gov/Briefing/FarmIncome/govtpaybyfarmtype.htm

http://www.ers.usda.gov/Briefing/FarmIncome/datasources.htm

http://www.ers.usda.gov/Briefing/FarmIncome/readings.htm

http://www.ers.usda.gov/Briefing/FarmIncome/data.htm

http://www.ers.usda.gov/Briefing/FarmIncome/glossary/glossary.htm

http://www.ers.usda.gov/AmberWaves/December09/Features/DebtLandscape.htm

http://www.ers.usda.gov/ChartsOfNote/


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usda outlook for the 2012 u.s. farm economy

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