AFBF analyzes USDA farm income projections

The AFBF pored through the USDA’s recent net farm income projections and noted the figures show the federal government’s crop insurance program is working as designed to protect crop revenue.

Compiled by staff

Published: Sep 6, 2012

The American Farm Bureau Federation (AFBF) pored through the U.S. Department of Agriculture’s (USDA’s) recent net farm income projections and noted the figures show the federal government’s crop insurance program is working as designed to protect crop revenue.

“The August 2012 net farm income forecast was not surprising to those who understand the interconnection between lower crop yields, the surge in grain and oilseed prices and crop insurance indemnities,” says Todd Davis, AFBF senior economist. “The increase in net farm income is not unusual as net farm income also increased in previous years of widespread drought.”

Davis noted the projections do not separate balance sheets between the U.S. crop and livestock sectors. He believes a balance sheet for the livestock and poultry sectors would show a vastly different scenario.

“Those firms that have the financial resources to cash flow higher feed costs, either through increased debt or equity, have the best chance of surviving to be able to market their production at higher prices,” he says. He notes USDA projects an upturn in livestock prices for late 2013.

The AFBF economist says the USDA report also suggests gross crop insurance indemnities could total over $ 8 billion. Those projections will likely increase if crop yields end up lower than USDA projections.

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