After substantial increases in 2010 and 2011, average net cash income for farm businesses is projected to be $84,900, in 2012, almost the same as in 2011, according to USDA’s Economic Research Service. 

The prediction captures many of the drought impacts that producers faced in 2012, which were generally offset by strong crop prices and payout of insurance indemnities. However, drought conditions have affected farm businesses differently across regions and among farm types and specializations. Commercial operations, which represent over 80 percent of production, are expected to experience a 1.2-percent decline in average net cash income while intermediate farms are expected to experience a 13-percent increase in 2012. Farm businesses specializing in program crops are forecast to have higher net cash income in 2012, while farm businesses specializing in livestock are forecast to have more varied outcomes

Although average net cash income for farm businesses specializing in all program crops is forecast to rise in 2012, some crop specializations will experience higher gains than others. For some producers, insurance indemnities are forecast to offset the impacts of declining yields associated with the drought. With increased wheat prices and record yields (the winter wheat harvest was largely completed before the onset of drought), average net cash income for wheat farm businesses is forecast up 27.5 percent over 2011. Despite lower average yields, average net cash income is forecast up 7.1 percent for corn farms due to expanded acreage and high prices. A few States less affected by the drought even experienced an increase in corn yields over 2011.

Soybean farm businesses have benefitted from high prices and, for some soybean-producing areas, late-season rains. Cotton and rice farm businesses are expected to benefit from strong performance in the grains and oilseeds they typically produce.

Cash expenses are forecast to increase about 6-7 percent across program crop farm businesses in 2012. Rent expenses are expected to increase 4.6 to 5.5 percent. Seed; fertilizer, lime, and chemicals; and fuel together make up around half of all cash expenses for farm businesses specializing in program crops, and these expenses are forecast up  12, 6, and 4 percent, respectively.

Other field crop farm businesses (sugar crops, hay, silage, trees, and woody crops) are expected to experience a 17-percent increase in average net cash income in 2012.

With declining prices for some livestock products and increasing feed prices, livestock farm business net cash income is expected to vary considerably in 2012 across different specializations. Feed costs are predicted to rise 18 percent, and make up 52 percent of expenses for dairy, 19 percent for beef cattle, 42 percent for hogs, and 35 percent for poultry farm businesses. After substantial gains in average net cash income in 2010 and 2011, dairy farm businesses are forecast to experience a 51 percent decline in 2012.

Increased expenses and a projected 2-percent decline in hog receipts are causing projected net cash income for hog farm businesses to decline more than 16 percent in 2012. Average net cash income for beef cattle farm businesses is expected to increase over 12 percent in 2012. Despite some herd liquidations and increased culling due to the drought, overall tight supply is expected to contribute to slightly higher cattle prices than in 2011. With increasing prices, average net cash income for poultry and egg farm businesses is forecast up 2 percent from 2011.

There is considerable regional disparity in the outlook for 2012 farm business net cash income, with four regions expected to experience losses from 2011 and four others expected to experience gains of over 10 percent. With large increases to crop farm income and sustained cattle farm income, net cash farm income is forecast to increase by almost 44 percent in the Northern Great Plains. The Prairie Gateway and Mississippi Portal are expected to benefit from increased program crop farm income. The largest drops in net cash farm income are in the Northern Crescent and the Fruitful Rim, where many farm businesses specialize in dairy production. Crop yields were affected by severe drought conditions in the Heartland, contributing to the forecast decline in its average net cash income.