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Agricultural Income and Finance Outlook, 2011 Edition

by Timothy Park, Mary Ahearn, Theodore Covey, Ken Erickson, Michael Harris, Jennifer Ifft, Christopher McGath, Mitch Morehart, Stephen Vogel, Jeremy G. Weber, and Robert Williams

Outlook No. (AIS-91) 46 pp, December 2011

Net farm income is forecast at $100.9 billion in 2011, up 28 percent from 2010 and 50 percent higher than the 10-year average of $67.4 billion for 2001-2010. Net cash income at $109.8 billion would be a nominal record, 19 percent above the prior record attained in 2010. Net value added is expected to increase by almost $24 billion in 2011 to $153.7 billion. Production expenses are forecast to jump substantially in 2011 to a record nominal high exceeding $300 billion. Prices paid indexes drive the forecast increase. Inflation-adjusted 2011 production expenses will exceed the previous peak reached in 1979.

The values of farm business sector assets and equity (assets minus debt) are forecast to rise in 2011, while farm debt is forecast to decline from 2010 levels. Farm sector asset values are expected to rise by 6.8 percent in 2011 as the values of land and farm buildings, crop inventories, purchased inputs, machinery and equipment and financial assets are all expected to rise in 2011. Farm sector debt is expected to fall from about $247 billion in 2010 to about $243 billion in 2011. The decline in real estate debt is expected to be about $4 billion (-3.0 percent). The farm business sector’s debt-to-asset ratio is expected to decline to 10.4 percent and debt-to-equity is expected to decline to 11.6 percent in 2011, indicating that the farm sector’s solvency position remains strong.

Average net cash income for farm businesses is expected to increase throughout most of the country in 2011, although income growth is not as high as experienced in 2010. High commodity prices for both crops and livestock are driving these increases, despite increasing expenses in all categories other than labor. Except for poultry, high prices in 2011 have helped the livestock sector to continue the strong performance of 2010 despite an environment of increasing feed expenses. Driven by the gains in most crop and livestock farms, all regions other than the Southern Seaboard are expected to experience at least a 7-percent improvement in average net cash income over 2010. Median farm household income increased by 3.7 percent in 2010 to $54,162 and is forecast to be higher in 2011. Bolstered by higher farm asset values, the balance sheet of farm households improved in 2010, with median net worth increasing by 6.5 percent to $576,745.

Keywords: Value added, farm income, farm costs, farm operator household, farm returns, financial performance, farm finance, wealth, net worth, assets, debt, farm household well-being

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Last updated: Saturday, May 26, 2012

For more information contact: Timothy Park, Mary Ahearn, Theodore Covey, Ken Erickson, Michael Harris, Jennifer Ifft, Christopher McGath, Mitch Morehart, Stephen Vogel, Jeremy G. Weber, and Robert Williams

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