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U.S. Farmer Income Up But so Is Food Price Inflation

  • Spence Cooper
  • December 5, 2011

According to the UDSA, the forecast for U.S. net farm income for 2011 is $100.9 billion, up $21.8 billion or 28 percent from 2010. A combination of factors contributed to the increase including growth in cash receipts, off-farm employment, and a year over year trade surplus amounting to a record high of $137.4 billion in farm exports.

The USDA claims all three measures of farm sector earnings experienced strong growth in 2011. U.S. farmers are earning 28 percent more for their products than they made last year. America’s farm household income increased over 3 percent in 2010 and is forecasted to increase 1.2 percent in 2011.

Highlights From The USDA Report

*Net farm income is forecast to rise 28 percent in 2011, matching the increase recorded in 2010.

*Net farm income and net cash income are both projected to exceed $100 billion for the first time in 2011.

*The USDA expects a more than 16-percent increase in sales of crop and livestock by U.S. farm operations in 2011, with gains spread out among many different categories.

*Crop sales are expected to exceed $200 billion for the first time in U.S. history, with record or near-record levels across different crop categories.

*Livestock sales are predicted to rise almost 17 percent, with double-digit increases across most categories, especially red meats.

*Total production expenses are forecast to jump about $34 billion (12 percent) in 2011 to nearly $320 billion, driven by increases in input prices.

Government payments are forecast to be $10.6 billion in 2011, a 14.4-percent decrease from 2010.

The one key take-away from the report is the increase in the cost of production at 12 percent, or $34 billion in 2011 to nearly $320 billion, driven by increases in input prices.

“Crop receipts are expected to rise over 16 percent in 2011, reflecting large anticipated increases in prices, especially for hay, corn, wheat, and cotton. Livestock receipts are expected to rise nearly 17 percent, led by strong prices for dairy and red meats.”

This means a substantial increase in food prices consumers pay at grocery stores and restaurants. The 2011 price jump is the first time that expenses will have exceeded $300 billion, and when adjusted for inflation, 2011 expenses set a record, surpassing the previous peak reached in 1979.

More people are eating raw foods: double-digit increases in quantities sold are expected for avocados, almonds, walnuts, and cranberries in 2011. Overall, fruit and tree nut sales are predicted to rise over 3 percent as the average price for fruit and nuts increases a little over 3 percent.

U.S. Farmer Income Up But so Is Food Price InflationThe drought in southern US states heavily influenced U.S. beef cattle markets, where cattle owners thinned out their herds early, placing cattle in feedlots where livestock are fattened for market before slaughter. The high rate of cow liquidation and the shift of the feedlot inventory forward will cause a huge rise in beef prices.

“The bi-annual USDA Cattle Inventory report released last month confirmed that the US cattle herd is likely to continue to decline over the next two to three years, reducing beef production and putting upwards pressure on both cattle and beef prices”

The USDA report claims U.S. beef exports are up 27 percent from last year. Dairy receipts are expected to increase by more than one-quarter as milk prices received by dairy farmers rise to more than $20/cwt. Hog producers are expected to benefit from strong demand for U.S. pork products, especially from Japan and China.

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