USDA projects lower net farm income over next few years

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, Feb. 13 - For U.S. farm groups who are struggling to defend the need for a safety net during a time of historically high prices, USDA delivered some important news today: Those high prices won't last forever.

Net farm income is forecast to fall from $92.8 billion this year to $79 billion in 2013 and bottom out at $76.4 billion in 2015, according to USDA's Long-term projections to 2021.

Although incomes will stay high compared to historical levels, USDA projected that margins will remain much tighter for the next decade and net farm income will only climb back up to $86.7 Billion by 2021.

Here are some of the key assumptions and findings in the report.

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·         Strengthening global food demand and sustained biofuel demand are major factors underlying projections of rising cash receipts after 2014.

·         Global demand for biofuel feedstocks is projected to continue growing. The largest producers-the United States, Brazil, the EU, and Argentina-are projected to expand output, although at a slower pace than in recent years.

·         Lower Government payments and rising farm production expenses offset some of the gains in cash receipts and other sources of farm income. Direct Government payments to farmers average about $9.6 billion over the next decade.

·        World meat demand and imports continue strong growth, especially in many middle- and low-income countries. Projected global growth for overall meat consumption averages more than 2 percent annually over the next decade, with per capita consumption increasing for each major type of meat (beef, pork, and poultry).

·        World pork imports are expected to continue to rise, and to increase by 0.77 million tons (16 percent).

·         Poultry meat imports by major importers are projected to increase by 1.5 million tons (21 percent) between 2012 and 2021.

·        After declining in 2012 from 2011's high levels, farm-level milk prices are projected to rise steadily over the projection period. However, increases are less than the overall rate of inflation largely because of efficiency gains in production resulting from technological improvements and consolidation in the sector.

·         Farm sales of horticultural crops are projected to grow by 1.5 percent annually over the next decade, reaching $69.2 billion in calendar year 2021, up from $59.6 billion in 2011.

·        Prices for crude oil are assumed to remain historically high over the next decade. They rise somewhat faster than the general inflation rate in the latter part of the projections reflecting sustained global economic growth. By the end of the projection period, the nominal refiner acquisition cost for crude oil imports is projected to be over $120 per barrel.

·         U.S. retail food price increases exceeded the general inflation rate in 2011, reflecting higher food commodity prices and energy costs combined with stronger post-recessionary food demand. Food price inflation for 2012 is expected to abate from the 2011 rate as many of the inflationary pressures that pushed consumer food prices up in 2011 are not expected to intensify.


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