The Rising Influence of Rising Affluence

[DewDiligence]

Rising Global Demand Boosts US Farm Income 31%

[USDA numbers for the 2010 growing season are bullish for DE and, to a lesser extent, for MON.]

http://online.wsj.com/article/SB10001424052748704679204575646910429242970.html

›DECEMBER 1, 2010
By SCOTT KILMAN

The U.S. Agriculture Department said Tuesday that net farm income, its rough measure of the agriculture sector's profitability, is expected to jump 31% this year to $81.6 billion from $62.2 billion last year.

The forecast shows how the global recession only temporarily interrupted a farm-belt boom that is being driven in large part by the expanding appetites of emerging nations such as China and the U.S. biofuels industry. [2010 US farm shipments to China were a record $18B.]

"The mid-1970s was the last comparable period when U.S. farming enjoyed multiple years of sustained levels of high output and income," the USDA report stated.

The Tuesday report is the second time the USDA has adjusted upward its profit outlook since the agency issued its original forecast of $63 billion in February. As a result, the sector's profitability has nearly returned to its level in 2008, when net farm income hit $86.6 billion. [2008 had the second-highest number even, surpassed only by the $87.3B in 2004.]

The government will issue its initial forecast for 2011 net farm income in February.

Thanks to broadly rising prices of livestock and major crops such as cotton, corn and wheat, farmers are generating 10.4% more revenue this year, the USDA calculates. At the same time, the farm sector's production expenses are rising just 2%.

One significant expense that took an unusual tumble this year was the price of seed [to the chagrin of MON], which had climbed so sharply since the advent of crop biotechnology in the mid-1990s that farmers complained loudly during the workshops held by the Obama administration this year to look at competition issues in agriculture.

According to the USDA, the prices farmers are paying for seeds this year are down 3.9%. Before this year, farmers saw their seed expenses jump 41% from 2006 through 2009, when it hit $15.5 billion, the USDA said.

Despite high grain prices and the surge in profitability, U.S. farmers are slated to collect about $12.4 billion in aid from Uncle Sam this year, close to the amount of federal aid they reaped in 2009.

Growers are getting about $4.8 billion in direct payments that aren't pegged to market prices, as well as checks for land-idling conservation programs and weather-related disasters, among other things.‹