An exceptional year for U.S. agriculture” — that's how USDA's economists characterize 2003's record crop yields and record cash net income.
What's more, say Mitchell Morehart and James Johnson of the agency's Economic Research Service, “the financial outlook remains strong for 2004” despite the setback to the cattle sector as a result of the recent “mad cow” scare.
They told attendees of the annual USDA Agricultural Outlook Forum at Arlington, Va., that this year should see crop receipts increase by more than $7 billion to a record $114 billion, based mainly on improved market conditions for corn and soybeans. Although livestock receipts are expected to decline from 2003's record level, the forecast is for the sector to exceed $100 billion for the third time in four years.
Even though crops are expected to generate more revenue in 2004, the economists say less of the farm household's earnings will come from farming, but that an expected 3 percent increase in income from off-farm sources “should help buffer the decline in total household income.”
Farmers and their households should benefit from higher asset values in 2004, Morehart and Johnson say, with the value of farm assets projected to increase by almost $43 billion. Real estate values are expected to rise by 3.5 percent, accounting for nearly 90 percent of the increase in the total value of farm assets.
“The importance of the non-farm economy to the economic well-being of farm households is reinforced by the significance of non-farm assets and debt,” they say. “About 20 percent of the average farm household's net worth could be attributed to non-farm sources.”
For the year just past, they note that the new records for net cash income were due to a combination of strong exports, excellent yields, and strong prices — and “a relatively high amount of government payments.” Continued growth in farm real estate values also helped push the aggregate of farm assets to new highs, while “modest increases in debt helped maintain a consistent level of solvency for the sector.
In both 2003 and 2004, Morehart and Johnson note, market receipts are expected to make up a greater share of net income than has occurred since 1997.
Prices for several agricultural commodities increased toward the end of 2003 and are projected to “sustain these relatively high levels through 2004.”
Corn, soybean, and wheat prices were sharply higher in 2003 than their average for the past five years, while broiler prices were more than 10 percent over the previous year and egg prices were up over 25 percent.
For the second consecutive year, receipts from crops and livestock should total more than $100 billion each, with 2004 expected to see a total $215 billion for the two sectors.
Corn, the number 1 crop in terms of cash receipts, could see an upward movement of as much as 16 percent in 2004, while soybeans, the nation's second largest crop, are expected to be up 16 percent also.
Strong demand for U.S. cotton in 2004, primarily from China, could boost receipts by nearly $700 million, the economists say. Another factor strengthening cotton receipts is a stocks-to-use ration that “could be the lowest since the 1997 crop.”
Projected low lending stocks are also expected to improve rice receipts.
There are “some notable exceptions” to the rosy 2004 outlook, Morehart and Johnson note.
Beef producers could see a $5 billion reduction in receipts as a result of the “mad cow” scare, with most countries that import beef from the U.S. imposing bans or restricting importation of beef from the U.S. “Even with this market uncertainty, beef receipts are expected to remain higher than they were in 2002.”
The combination of consumers substituting poultry for beef and the declining dollar's impact on markets could cause expected poultry and egg receipts to rise by 7 percent.
Dairy cow numbers declined in 2003 for the first time in several years, but an expected increase in milk productivity may offset the lower herd size and result in “a relatively small decline in overall milk production.” Further productivity gains are anticipated in 2004; that, combined with a lower inventory of milking cows, “could result in unchanged receipts.”