Production expenses rise again but less than in previous years
By Wes Nelson
Farm Service Agency
WILLMAR — According to the U.S. Department of Agriculture’s latest farm income and expense forecast, total farm production expenses are projected to reach another nominal and inflation-adjusted record high of $352 billion in 2013. However, the expected rise in expenses is less than half the increases in 2012 and 2011.
The smaller expected increase in 2013 is due to a slowdown in the overall rise in the price paid for farm inputs.
With the exception of 2009, total farm production expenses have had a string of annual increases since 2002.
The three major crop-related expenses are expected to drop by a combined 1.4 percent in 2013. Seed and pesticide expenses are expected to rise, but a large decrease is forecast for fertilizer expenses. However, the ultimate size of the decrease will depend on buying patterns.
Fertilizer prices were down only slightly from 2012 through mid-2013, the period when most fertilizer was purchased. Prices have since declined sharply.
The USDA is also forecasting a small drop in fuel and oil expenses because of a projected decrease in refiners’ acquisition costs.
The two major livestock-related expenses — feed and livestock purchases — are forecast to rise by a combined 1.8 percent. This increase is significantly less than in the previous two years, largely due to smaller increases in the average annual prices for feed and cattle.
Feed prices were slightly below December 2012 levels through the first eight months of 2013, and are projected to decline through the year due to lower corn and soybean prices.
Total labor expenses, including contracted labor, are expected to climb almost 10 percent in 2013 due to a 4 percent increase in wage rates and a 6 percent rise in total output.
Cash rent expenses are projected to increase by 6.6 percent, the result of an increase in land values and a small decline in planted acreage. Share rent is forecast to increase by 6.2 percent, the same as the increase in the value of crop production.
Total interest expenses are forecast to increase 3 percent in 2013 as non-real estate expenses climb by almost 10 percent and real estate interest expenses decline by more than 2 percent.
But despite the increase in production expenses, 2013 is still expected to be a very profitable year for farmers, with net farm income expected to total $131 billion in 2013, up 15.3 percent from the 2012 estimate of $113.8 billion.
After adjusting for inflation, net farm income in 2013 is expected to be the highest since 1973.
to increase in 2013
Government payments paid directly to producers are expected to total $11.4 billion in 2013, a 6.8 percent increase from 2012.
Direct payments under the Direct and Counter-cyclical Program and the Average Crop Revenue Election Program are projected to total $4.39 billion in 2013, down 6.3 percent from 2012. However, the decline is largely due to sequestration.
Despite recent price downturns, 2013 commodity prices are above the levels that would trigger counter-cyclical payments, marketing loan gains and loan deficiency payments. However, based on 2012 crop-year revenue losses, farmers are expected to receive $250 million in Average Crop Revenue Election Program revenue payments, mostly for corn and soybean producers in states that were hardest hit by drought last year.
Disaster assistance payments are forecast to increase by 84 percent from 2012. Under the Supplemental Revenue Assistance Program, the bulk of the expected $1.68 billion paid to producers in 2013 are for commodity losses incurred during the 2011 crop year.
Except for the Noninsured Assistance Program, disaster relief programs under the 2008 farm bill only covered losses incurred prior to Oct. 1, 2011. Losses for the 2012 crop year are not covered.
Minn. ag exports
set record in 2012
According to the Minnesota Department of Agriculture, Minnesota agricultural exports set a record high of $8.2 billion in 2012. The 2012 total represents an increase of nearly $1 billion or 14 percent more than in 2011.
Minnesota also moved up in the national rankings of the largest agricultural exporting states by securing the No. 4 spot, which is up two places from 2011.
Minnesota’s top four export commodities — soybeans, corn, pork, and feed — accounted for more than 60 percent of the state’s total agricultural exports.
More than one-third of the state’s total agricultural production is exported. Agriculture is Minnesota’s second-largest exporting sector with major markets in China, Mexico, Japan, Canada, Korea and Taiwan.
Minnesota Department of Agriculture officials estimate that agricultural exports support more than 68,800 jobs in the state, and generate additional economic and business activities in several non-agricultural sectors.
The value of Minnesota’s top exported commodities in 2012 include: soybeans – $2.2 billion; corn – $941 million; and pork – $814 million.
China was the state’s top export market for soybeans, and Japan the biggest market for corn and pork.
Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.