U.S. Farm Income to Reach Record $100.9 Billion, USDA Says

U.S. farm income will jump 28 percent this year to a record $100.9 billion because of higher crop and livestock prices, the government said.

The U.S. Department of Agriculture lowered its estimate from $103.6 billion forecast in August because of declines in grain and oilseed prices since Sept. 1, according to a report today on its website. Income in 2010 totaled $79.1 billion. Sales of crops including corn, soybeans, wheat and cotton will rise 19 percent to $204 billion, and livestock receipts will jump by 17 percent to $164.1 billion, the USDA said.

Higher farm income and record land values that spur purchases of Monsanto Co. (MON) seeds, Agrium Inc. fertilizer and Deere & Co. tractors have been driven by greater demand for exports and biofuels. The U.S. shipped a record $137.4 billion of farm goods overseas in the year ended Sept. 30, the USDA said earlier this month. Ethanol will consume a record 5 billion bushels, or 41 percent, of this year’s corn crop, three times the total used five years ago, department data show.

“Across a broad swath of American agriculture, things are still good,” Cargill Chief Executive Officer Greg Page said in an interview today. “A voice of caution has been introduced to the almost unbridled optimism we had in July and August, but I think the outlook is still quite positive.”

Futures Rise

The Standard & Poor’s GSCI Index of eight farm commodities has dropped 18 percent this year, as an escalating debt crisis in Europe dimmed prospects for the economy and farmers boosted output of crops including wheat and cotton. The gauge still is up 18 percent since the end of 2009, and this year’s average is the highest ever.

Average corn, soybean and wheat prices this year are at least 24 percent higher than in 2010. Futures for the commodities have fallen at least 22 percent through yesterday since Aug. 31 on concerns that economic growth is slowing. Cattle and hog futures traded in Chicago are up at least 16 percent in the past year.

Expenses such as diesel fuel and animal feed are projected to rise by 16 percent to $223.1 billion, the USDA said. Government subsidies will decrease by almost 15 percent to $10.6 billion, according to the report.

The increase in farm income drove agricultural real-estate prices to a record $2,350 an acre this year, the USDA said in a report in August. Farmland values in Midwest and Great Plains states were up at least 25 percent in the third quarter from a year earlier, the Federal Reserve banks in Chicago and Kansas City said in reports released earlier this month.

Equipment Sales

Deere, the world’s biggest farm-equipment maker, topped analysts’ estimates with net income of $669.6 million in the quarter ended Oct. 31, the company said last week. The Moline, Illinois-based company also raised its price forecasts for corn, wheat and soybeans, while lowering its cotton outlook.

Cargill, the largest closely held company in the U.S., said Oct. 10 that its profits in the three months ended Aug. 31 fell 66 percent from a year earlier because of global economic uncertainty that created turbulence in commodity markets.

“We had an extremely good harvest, better than we thought going into it,” said Jay Lynch, who raises corn and soybeans near Ottumwa, Iowa. “Incomes are going up.”

Higher incomes and land values may begin prompting more purchases of farm equipment, said Lynch, 32. Growers worried that crop prices may collapse and who have remained conservative in purchasing will eventually loosen their wallets as profits mount, he said.

Replacing Bins

“We need to build infrastructure back,” Lynch said. “Thirty-year-old grain bins eventually have to be replaced.”

Gross farm income, which includes rent and other benefits from operations, is projected to reach $410.2 billion, up 16 percent from 2010.

Among farmer costs in 2011, fertilizer expenses will rise 28 percent to $26.9 billion, while feed costs are projected to increase 23 percent to $55.7 billion. The cost of purchased livestock and poultry also rose, jumping 18 percent to $23.1 billion.

“You’ve got these declining herd sizes, and you’ve got this increasing export demand, so availability is less,” said Corinne Alexander, an agricultural economist at Purdue University in West Lafayette, Indiana. That trend may continue for years, as high corn prices and persistent drought in the southern Great Plains make livestock-raising more expensive, she said.

Today’s estimates will be revised in February, when the first forecasts for 2012 will also be released.

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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