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Net farm income to decline sharply in 2009

WILLMAR -- According to the latest forecast from the U.S. Department of Agriculture, net farm income in 2009 is expected to total $57 billion in 2009, down $30 billion or 34.5 percent from 2008.

The 2009 net farm income forecast is also $6.5 billion below the previous 10-year average of $63.6 billion. However, the 2009 income level will still be the eighth largest on record, with the top five years all occurring between the years of 2003 and 2008.

In 2009, crop prices have continued to decline, while prices for livestock animals and livestock products have also experienced sharp declines.

With economic conditions deteriorating worldwide, demand for exports has weakened, forcing farmers to accept prices that are lower than were expected earlier in the year.

On the input side, expenses are also projected to be lower in 2009, especially for most manufactured inputs, feed and services, such as repairs or transportation.

Overall, the reduction in gross income will exceed the reduction in production costs by $30 billion, leaving all net measures of income and output below the record or near-record levels of 2008.

In 2009, average family farm household income is forecast to be $76,065, down 3.5 percent from 2008 and 6.8 percent below the most recent five-year average.

In 2009, the average family farm is forecast to receive 8.7 percent of its household income from farm sources, with the rest from earned and unearned off-farm income.

USDA proposes new agreement for crop insurance

The USDA's Risk Management Agency, which administers the federal crop insurance program, today released the first draft of a proposed new Standard Reinsurance Agreement between the Federal Crop Insurance Corporation and the crop insurance companies that deliver the program.

The 2008 farm bill authorized the Risk Management Agency to renegotiate the agreement, which was last negotiated in 2005.

Insurance companies are expected to be notified by the end of the year that the current agreement will be canceled as of June 30, 2010, paving the way for a new reinsurance agreement to be signed by all parties.

The proposed new agreement includes six primary objectives which the Risk Management Agency hopes to obtain in a renegotiation of the reinsurance agreement. The objectives include:

- Maintain producer access to critical risk management tools.

- Realign the administrative and operating subsidies provided to insurance companies so that they closer reflect actual delivery costs.

- Provide a reasonable rate of return to insurance companies.

- Protect producers from higher costs, while equalizing performance across states to more effectively reach under-served producers, commodities and areas.

- Simplify provisions to make the new reinsurance agreement more understandable and transparent.

- Enhance program integrity.

Based on the terms of the existing reinsurance agreement and data provided by the Risk Management Agency, annual insurance industry payments have doubled from $1.8 billion in 2006, to an estimated $3.8 billion in 2009. Meanwhile, the number of total policies has declined slightly from 1.3 million in 2000, to 1.1 million in 2008.

During crop year 2008, the federal crop insurance program protected $89.9 billion in crop values in the United States.

November corn prices higher, soybeans lower

According to the Minnesota Agricultural Statistics Service, prices received by Minnesota farmers during November averaged $3.70 per bushel, an increase of $0.10 from October's average price.

November soybean prices declined to an average price of $9.20 per bushel, down $0.18 from October.

Hog prices averaged $41.80 per hundredweight, an increase of $2.50 from October's average price.

November beef prices averaged $76.30 per hundredweight, up $2.10 from the previous month.

Minnesota milk prices during November averaged $16 per hundredweight, up $0.70 from October.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.