September 4, 2007

Record US farm income for 2007 partially offset by rising production costs

Although the USDA expects a record US$87.1 billion in farm income for 2007, rising farm production costs are somewhat dampening any sense of optimism in the farming industry, the American Farm Bureau Federation said.

According to the USDA, livestock cash receipts are expected to increase to US$140 billion, up 17.5 percent, thanks to improved prices. Cash crop receipts are estimated at US$136 billion, up 13.5 percent due to higher wheat, corn and soy prices.

However, total cash farm expenses rose to US$222 billion, an 8.5 percent increase from 2006, according to USDA.

Energy prices rose 4.5 percent but was dwarfed by the growth in fertilizer costs, which was up 17 percent.

Energy costs rose 71 percent over the past four years and costs for fertilizers were up 56 percent. While such expenses rise year after year, livestock prices tend to experience greater fluctuations, AFBF Senior Economist Terry Francl said.

Moreover, American spending on food has been relatively stagnant for years.

Americans spend about 10 percent of their disposable income on food, the lowest in the world, he added.

Despite popular perception, farming is also becoming a more important segment in the nation's economy. The farm sector's net value to the national economy is forecast to be US$135.4 billion in 2007, up $31.1 billion from 2006.