Not every farmer will be celebrating the drought, but apparently it is bringing financial benefits to some, and maybe quite a few. The USDA’s Economics Research Service (ERS) reported earlier this week that 2012 net farm income will be up 3.7% compared to 2011.
Net cash income will also be up, along with net added value, all thanks to higher prices and crop insurance indemnity payments that have more than offset declining milk sales and higher production expenses. And because of the benefits of the crop insurance program, policy makers on Capitol Hill may re-open their analysis of crop insurance when they get around to debating the Farm Bill again.
National headlines, television news coverage, and widespread evidence of hot, dry weather over most of the nation have brought urban empathy on rural families. But when those urban folks hear that farmers will make a record income this year, their sympathy may quickly wane and farmers may no longer be in the compassionate spotlight they are now.
In fact, some taxpayers who are budget hawks will call their Congressman to ask how much the government is spending for crop insurance that may be paying more than farmers would have received with a normal crop. The answer will not be friendly and may start a movement in Congress to make major program changes that House and Senate Ag Committee members may have a hard time stopping.
Farm Income Is Increasing for 2012
The ERS forecast for 2012 income reports “Crop receipts are leading the 2012 income increase, with strong gains in corn, soybean, hay, and wheat sales reflecting higher commodity prices. A large anticipated rise in other farm income reflects large increases in crop insurance indemnity payouts.”
It also reports, “Government payments paid directly to producers are expected to total $11.1 billion in 2012, a 6.3% increase from $10.4 billion paid out in 2011.” (These payments do not represent crop insurance. They represent $5 bil. in direct payments, counter-cyclical payments, ACRE payments, and loan deficiency payments, nearly all of which are for southern crops, such as rice and peanuts and cotton.)
click image to zoom Specifically, the USDA economists say, “Hit hard by the 2012 drought, U.S. corn production is expected to decline, leading to drops in exports and alcohol for fuel use in marketing year 2012.
While the quantity of corn for grain sold in 2012 is expected to decline almost 7.4 percent, a forecast rise of $1.31 per bushel should boost annual receipts. Scorching heat and a prolonged drought is expected to result in the lowest soybean supply in 9 years. Soybean sales are expected to experience a significant rise in 2012 as an increase of almost $3 per bushel more than offsets an 8 percent decline in the quantity of soybeans sold.”