Bloomberg News

U.S. Farm Income May Fall on Bigger Crops, Increased Expense

February 13, 2012

(Updates with crop and livestock values in second paragraph, costs beginning in sixth paragraph.)

Feb. 13 (Bloomberg) -- U.S. farm net income probably will fall 6.5 percent in 2012 from last year’s record as the biggest crop acreage in a generation and rising costs trim profits, the Department of Agriculture said.

Income will total $91.7 billion, down from a revised $98.1 billion in 2011 and the second-highest ever, the USDA said today in a report. The value of crops will rise 3.1 percent to $204.9 billion, while revenue from livestock sales will increase 0.6 percent to $165.7 billion, the USDA said. Expenses such as diesel fuel and animal feed will increase 3.7 percent to $235.1 billion, eroding profits.

Farmers this year will plant the biggest corn crop since World War II, prompted by the highest prices in at least four decades, according to a Bloomberg survey of farmers, bankers and analysts. Agricultural exports may fall to $132 billion in the year that began Oct. 1, down from a record $137.4 billion last year, the department said. With increased supplies, food inflation may ease this year to no more than 3.5 percent, down from 3.7 percent in 2011, according to USDA data.

Demand Concerns

“It could be a very big corn crop this year,” said Tim Eike, who grows the grain and soybeans on 23,000 acres that he farms with his wife’s relatives in Pawnee, Illinois. “I’m still worried about demand because some countries may not have the money to pay for these high-priced crops.”

U.S. government subsidies may rise to $11 billion this calendar year, up 4 percent from 2011, according to today’s report.

Among farmer costs in 2012, fertilizer expenses will be little changed at $27.6 billion, while spending on fuel increases 1.3 percent to $17.2 billion, the USDA said. Pesticide costs will jump 4.5 percent to $11.3 billion, and electricity will increase 5.4 percent, to $4.8 billion.

Feed costs, the biggest single component of farm spending, are projected to increase 3.5 percent to $59 billion. Seed expenses may rise 0.7 percent to $17.8 billion.

Today’s estimates, the USDA’s first for 2012, will be revised in August.

--With assistance from Whitney McFerron and Jeff Wilson in Chicago. Editors: Daniel Enoch, Patrick McKiernan.

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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