Surging supplies of U.S. corn and soybeans coupled with higher revenue for specialty crops will boost farm incomes to a record this year even after grain prices fell, the U.S. Department of Agriculture said.
Net-farm income will reach $131 billion, up 8.6% from $120.6 billion forecast in August and 15% higher than a year earlier, the USDA said in a report today.
Farmers in the U.S., the world’s biggest corn grower, are projected to produce a record 13.989 billion bushels of the grain this year. Soybean output will be 3.258 billion bushels, the third-biggest ever, government forecasts show. Global food costs tracked by the United Nations are 14% below the all-time high set in February 2011 as crop supplies gained.
“Bigger grain crops mean farmers have more bushels to sell, and that helps to offset the drop in grain prices,” Michael Swanson, the senior agricultural economist in Minneapolis at Wells Fargo & Co., the largest U.S. farm lender, said in a telephone interview. “A lot of specialty crops including hay, vegetables, fruits and nuts have done very well this year. Pistachios and almonds are just gold.”
Corn prices on the Chicago Board of Trade slumped 39% this year, the biggest decline among the 24 commodities tracked by the Standard & Poor’s GSCI Spot Index. The GSCI gauge dropped 3.7%, while the MSCI All-Country World Index of equities climbed 18%.
Since Sept. 1, soybeans inspected for export shipment rose 5.9% from a year earlier to 585.6 million bushels, the fastest pace ever, USDA data show. U.S. corn stockpiles on Aug. 31, 2014, before next year’s harvest, will be 1.887 billion bushels, more than double a year earlier.
Inventories are adding $12 billion to farm income this year, compared with accounting for a loss of $8.1 billion in 2012 after the worst drought since the 1930 ravaged crops.
“On soybeans, it’s mainly that higher quantities were marketed than expected,” Mitch Morehart, a USDA economist who oversees the income report, said in a telephone interview. ‘On corn, it’s the reverse. It’s a potentially record crop, and a lot of it will be in year-end inventories,’’ which the USDA factors into incomes, he said.
The value of crops sold to companies such as Cargill Inc., Archer-Daniels-Midland Co. and Blue Diamond Growers will be $217.2 billion, up 2.9% from the August estimate. Crop sales were a record $223.5 billion in 2012. Revenue from livestock sales will increase 5.8% from a year earlier to an all-time high of $181.5 billion.
Net-cash income, which measures the difference between cash expenses and the value of commodities sold, is forecast at $129.7 billion, 3.5% less than a year earlier. Farm real- estate assets are estimated at $2.484 trillion, up 7.5% from last year and 42% higher than 2009.
Farm expenses are down 0.6% from the August forecast to $352 billion. That’s still up 3.2% from a year earlier, the 11th increase in the past 12 years, the USDA said. In both nominal and inflation-adjusted dollars, 2013 production expenses are the highest on record. Labor and rent costs will increase the most, while producers are projected to pay less for fuel and fertilizer.
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