2013 Net Farm Income Predicted Up, But Net Cash Income Down

Production Expenses

One of the big issues is the $19.2 billion increase in production expenses, which will be up to $353 billion, and the highest on record. Production expenses have increased 79% in the past decade. That includes a 106% increase in manufactured inputs as well as those produced on the farm, such as livestock feed. Other overhead expenses have increased 60% in the past decade. Among those expense items:

• Major livestock expenses are projected to rise by 5%, primarily for feed.
• Expenses for purchased livestock will slow down, primarily cause by contraction in the cattle industry.
• While a 13.5% increase in project in crop production, expenses are expected to rise $656 million, mostly from seed and pesticide. Those combined with fertilizer, increased $11.3 billion the past two years. The lower cost results from fewer planted acres expected in 2013.
• More farmers will be taking crop insurance and even with lower premium costs, the increased volume is pushing up total expenses.
• Other expense increases include an 11% increase in labor costs and a 12% increase in cash rent and share rent payments. Total interest payments are expected to rise 22% for operating loans, but decrease 9% for land loans.

The increase in NFI results from a return to trend yields (the current ERS expectation) and from increased production that will reduce commodity prices, which are expected to cause farmers to withhold from the market for a longer period of time than in the 2012 harvest. ERS says, “The value of crop production is expected to rise 11% in 2013, despite a predicted decline in crop receipts. The difference indicates the significant role of crop inventories. Crop receipts are forecast to decline by $3.2 billion in 2013, which would be the first decline since 2009.”