There are a few ways to slice and dice the 2007 farm year. But one thing is clear: It was a tremendous year. Farming is making money, and farmers have retired a lot of debt. Here are some numbers to prove it.
Net cash income is forecast at $85.7 billion. That's up 27% from 2006 and only slightly lower than the record set in 2005.
Average farm household income—farm and nonfarm income—is expected to be $83,622 in 2007, up 8% from the year before.
Sixty percent of U.S. farms report owing no debt.
The value of farm assets is the highest ever.
Pushed higher by export demand and the growing renewable fuels industry, the value of crop production is up $30 billion over 2006.
It is difficult to find much pessimism about agriculture's near-term future. Growing demand for biofuels and exports, supported by world demand and a sharply deflated dollar bodes especially well for grain producers. Look at the farm sector. It is doing better than the average American household. Income in farm households is 17% higher than the average U.S. household.
But there are some caution lights out there.
A devalued dollar has increased the cost of imported energy. In turn, ammonia, the main source of nitrogen in fertilizer, is up 130% over six years.
This leaves corn farmers especially vulnerable to a largely uncontrollable cost. Fertilizer expenses rose 19.5% in 2007.
Production costs have reached all-time highs, up more than 9%. The greatest price increases are found in feed, fertilizer and seed.
Farm debt, just passing $215 billion, is at an all-time high. This is a cost the farm sector can absorb as long as it doesn't stumble.
There is one other area to watch: the rapidly growing ethanol industry. Today, the industry can produce 7 billion gallons of ethanol. By 2010 annual production capacity could exceed 13 billion gallons.
That's either a really good thing, or it could be a sign of overexpansion. Hard to tell. But there are a couple of notes for concern from USDA. Ethanol prices in Iowa and Nebraska fell 75 cents a gallon from prices this past spring. The agency also looked at one Midwestern 40-million-gallon plant. The managers there reported that the price for which it could sell ethanol had fallen below its total cost of production by 3 cents a gallon.