New Record Now Set for Farm Income

USDA now forecasts 2001 farm net cash income to be 6% higher than last year, continuing the trend of annual increases since 1998. At $60.8 billion, the 2001 figure would surpass 1993's previous cash net income record. This cash-based measure of income indicates the availability of funds to cover cash operating costs, finance capital investments and savings, service debts, maintain living standards, and pay taxes.

U.S. net farm income for 2001 is forecast at $49.4 billion, up $3 billion from last year, as a result of greatly improved market conditions in the livestock sector, particularly for dairy operations. This income measure indicates the profit or loss associated with a given year's production. Both forecasts—net farm income and net cash income—are slightly above the 1990-2000 average.

Government payments will continue to be an important source of farm income. While down slightly from last year, supplemental appropriations this past summer will keep payments above $20 billion for the third consecutive year. For this year, the forecast value of production for livestock and products has risen by $9.6 billion, while the forecast value of crop production has risen only $2 billion.

Medium to large dairy operations are projected to show the most improvement in financial position in 2001, with net income, on average, increasing almost $40,000 per farm. Higher milk prices will drive the higher farm incomes.

Farm real estate values increased 4.1% in 2000 and are forecast to increase by an average of 3% this year supported by favorable mortgage interest rates, farm program payments, and demand for land for urbanization and recreational purposes.

For farm business equity, it too should continue to increase in 2001 as farm asset values rise more rapidly than farm debt. In current dollars, net worth is forecast to exceed $1 trillion dollars, up almost $31 billion over 2000.

Household income, on average, for 2001 is forecast to increase less than 1% from last year. The off-farm earnings component of total household income is forecast to increase by 1%, more than offsetting a decline in the farm earnings component resulting from continuing low crop prices.

The full report can be found on the ERS website at http://www.ers.usda.gov/publications/ais77/.