2013 will be a banner year for farm profits, according to analysis that ignores the drought
2012 was a brutal year for American farmers. The massive drought meant that the Department of Agriculture paid out $15 billion in crop insurance; prices of staple crops skyrocketed as yields plummeted.
It appears, however, that this was the darkness before the dawn. A new estimate from the USDA suggests that 2013 will be the most profitable year for farmers in four decades. From The Wall Street Journal:
The Department of Agriculture projected in a report Monday that net farm income in the U.S. will reach $128.2 billion in 2013—the highest since 1973 when adjusted for inflation and the highest on record on a non-adjusted basis.
The rosier outlook is driven by expectations farmers will grow more corn and soybeans after last year’s drought. Analysts predict increases in production will more than offset any price declines and rising costs, with the agency seeing corn stockpiles rising by more than 2 billion bushels.
The forecast also reflects a continued boom in the farm belt initially fueled by rising global demand for grains and increased mandates for corn-based ethanol.
And the first thing those farmers will do is repay the USDA for its crop insurance outlays in 2012, I assume. After all, it was God who made a farmer, not the USDA.
There is, however, a great big caveat in the government’s predictions.
The USDA’s forecast for 2013 is based on historical yield averages and doesn’t take into account current weather conditions. Parts of the Midwest, such as Indiana and Illinois, have seen a return in moisture, but much of the Great Plains, including Nebraska and Kansas, remain in drought.
“If we don’t get some above-normal rainfall through the next few months, we are going to enter the [growing] season very, very dry,” said Steve Nelson, president of the Nebraska Farm Bureau, who grows corn and soybeans in the south central part of the state.
An estimate in January suggested that the 2012 drought has already turned into the 2013 drought, and is likely to last until April.
So how much crop insurance should we put you all down for?
Philip Bump writes about the news for Gristmill. He also uses Twitter a whole lot.
Also in Grist