Farm incomes, production costs up

WASHINGTON – Although the Agriculture Department has revised its 2007 net farm income estimate up $20 billion to a record $87.1 billion on the strength of higher livestock and crop prices, the glass is only half full for America’s farmers.
Production costs. Farm production costs are also escalating, according to the American Farm Bureau Federation.
The previous net farm income record of $85.9 billion was set in 2004.
“The change in cash receipts was surprisingly balanced between livestock and crops,” said Farm Bureau’s Senior Economist Terry Francl.
Livestock cash receipts are expected to increase to $140 billion, up 17.5 percent, on the strength of improved cattle, hog, poultry and dairy prices.
Crop cash receipts are estimated at $136 billion, up 13.5 percent due to higher wheat, corn and soybean prices.
Expenses. Total cash farm expenses rose to $222 billion, an 8.5 percent increase from 2006, according to USDA.
Rising energy prices drove up fuel and oil prices 4.5 percent and fertilizer 17 percent 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 percent and fertilizer costs 56 percent. And unlike income and cash receipts, which fluctuate up and down over the years, most expense categories tend to compound higher year after year,” said Francl.
A significant change in the share of disposable income U.S. consumers spend on food is not anticipated, according to American Farm Bureau Federation.
Stagnant spending. “Despite slightly higher retail prices, U.S. consumers still spend only about 10 percent of their disposable income on food, less than citizens anywhere else in the world,” said Francl.
The farm sector’s net value added to the national economy is forecast to be $135.4 billion in 2007, up $31.1 billion from 2006.