Farm Income Forecasts Available
Sept. 2, 2005 — The U.S. Department of Agriculture (USDA) Economic Research Service (ERS) has released its 2005 farm income and costs forecasts.
In 2005, net farm income is forecast to be $71.8 billion, down $10.7 billion from the record $82.5 billion estimated for 2004. Income is forecast down in 2005 only because income rose $23 billion to an unprecedented level in 2004. In 2004, both crop and livestock commodities experienced exceptionally favorable market and/or production conditions.
Two consecutive years of record-high corn production and large harvests for other major crops and unusually high prices for livestock and milk created record earnings for the farm sector, and participants who assume the risks of production (farmers, partners and contractors) received the benefits in higher incomes.
Livestock production expected to exceed $120 billion for the second year
Value of livestock production is forecast to be $125.3 billion in 2005. Cash receipts from all livestock species in 2005 are forecast not only to exceed the $100-billion mark for the fourth time during the past five years, but to exceed the 2004 record-high by more than $183 million. Even with Canadian fed cattle under 30 months old allowed to enter the U.S. beef market for harvest starting July 18, 2005, beef producers are projected to have an increase in their receipts of more than $2.3 billion over 2004. Cattle prices in 2005 are expected to be more than $2 per hundredweight (cwt.) higher than in 2004, which was a record year.
Higher production expenses in 2005
Total production expenses in 2005 are projected to be $218.7 billion, up $8.9 billion, or 4%. Since a decline in 2002, expenses have increased around $7 billion or more in each of the last three years. Rising costs of energy-based inputs and increasing interest expenses will account for more than 60% of the increase in costs in 2005. Much of the increase will come from rising prices paid for those inputs. Prices paid for fuel, for example, are up more than 24% (from 2004) during the first half of 2005.
Increases of more than $1 billion are expected to occur in fuels/oils, interest, fertilizer, and repair/maintenance costs. The only decreases forecast for 2005 are in feed and livestock costs and poultry purchases — both 2% or less. Price levels for inputs will again play a significant role in the increase for all items other than feed and purchased livestock. Rising input prices combined with a small reduction in farm output are forecast to result in a higher level of total expenditures for production inputs.
Feed expenses are forecast to be $29.4 billion, down 2% from 2004. The principal factor in this drop is a 5% reduction in feed prices. Feed grains are down 17%, and complete feeds and concentrates are about 5% and 3% lower, respectively. The only feedstuff whose price is expected to rise is hay. Grain-consuming animal units are forecast to be up 1% in 2005, with dairy, hogs and broilers contributing to the increase. At $17.3 billion, livestock and poultry purchases will be 2% lower. Cattle and calves account for around three-fourths of this expense. Even though the farm price for cattle will be up, an expected drop in cattle on feed will lower expenditures. One reason for the reduction in cattle on feed is greater retention of cattle and calves on farms.
Fuel expenses are expected to rise about $2 billion to $10.2 billion, an increase of 24%. The price of diesel has risen 35% through July 2005.
For the complete report, visit www.ers.usda.gov/briefing/farmincome.
Sept. 2, 2005 — The U.S. Department of Agriculture (USDA) Economic Research Service (ERS) has released its 2005 farm income and costs forecasts.
In 2005, net farm income is forecast to be $71.8 billion, down $10.7 billion from the record $82.5 billion estimated for 2004. Income is forecast down in 2005 only because income rose $23 billion to an unprecedented level in 2004. In 2004, both crop and livestock commodities experienced exceptionally favorable market and/or production conditions.
Two consecutive years of record-high corn production and large harvests for other major crops and unusually high prices for livestock and milk created record earnings for the farm sector, and participants who assume the risks of production (farmers, partners and contractors) received the benefits in higher incomes.
Livestock production expected to exceed $120 billion for the second year
Value of livestock production is forecast to be $125.3 billion in 2005. Cash receipts from all livestock species in 2005 are forecast not only to exceed the $100-billion mark for the fourth time during the past five years, but to exceed the 2004 record-high by more than $183 million. Even with Canadian fed cattle under 30 months old allowed to enter the U.S. beef market for harvest starting July 18, 2005, beef producers are projected to have an increase in their receipts of more than $2.3 billion over 2004. Cattle prices in 2005 are expected to be more than $2 per hundredweight (cwt.) higher than in 2004, which was a record year.
Higher production expenses in 2005
Total production expenses in 2005 are projected to be $218.7 billion, up $8.9 billion, or 4%. Since a decline in 2002, expenses have increased around $7 billion or more in each of the last three years. Rising costs of energy-based inputs and increasing interest expenses will account for more than 60% of the increase in costs in 2005. Much of the increase will come from rising prices paid for those inputs. Prices paid for fuel, for example, are up more than 24% (from 2004) during the first half of 2005.
Increases of more than $1 billion are expected to occur in fuels/oils, interest, fertilizer, and repair/maintenance costs. The only decreases forecast for 2005 are in feed and livestock costs and poultry purchases — both 2% or less. Price levels for inputs will again play a significant role in the increase for all items other than feed and purchased livestock. Rising input prices combined with a small reduction in farm output are forecast to result in a higher level of total expenditures for production inputs.
Feed expenses are forecast to be $29.4 billion, down 2% from 2004. The principal factor in this drop is a 5% reduction in feed prices. Feed grains are down 17%, and complete feeds and concentrates are about 5% and 3% lower, respectively. The only feedstuff whose price is expected to rise is hay. Grain-consuming animal units are forecast to be up 1% in 2005, with dairy, hogs and broilers contributing to the increase. At $17.3 billion, livestock and poultry purchases will be 2% lower. Cattle and calves account for around three-fourths of this expense. Even though the farm price for cattle will be up, an expected drop in cattle on feed will lower expenditures. One reason for the reduction in cattle on feed is greater retention of cattle and calves on farms.
Fuel expenses are expected to rise about $2 billion to $10.2 billion, an increase of 24%. The price of diesel has risen 35% through July 2005.
For the complete report, visit www.ers.usda.gov/briefing/farmincome.
— Information provided by ERS.
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