In 2005, net farm income is forecast to be $71.5 billion, down $11 billion from the record $82.5 billion estimated for 2004. After rising 30% between 2003 and 2004, net cash income for the average farm business operation is projected to decline from $71,700 in 2004 to $69,900 in 2005, according to the latest figures from USDA's Economic Research Service.
The largest decline in average net cash income is for wheat farms. Average farm household income in 2005, which includes off-farm as well as farm income, is expected to continue a 5-year string of annual increases. Average farm household income for 2005 is forecast at $83,660, up 2.7% from 2004.
Direct government payments are expected to be $22.7 billion in 2005, up from $13.3 billion in 2004. Total production expenses in 2005 are projected to be $221.9 billion, up $12.2 billion from 2004. The prices of oil and natural gas are big drivers of the increased costs for purchased inputs such as fuels, fertilizers, pesticides, and electricity.
Farms are expected to contribute $118 billion in net value added to the U.S. economy in 2005, down from $126 billion in 2004. High-value crop, cash grain, and soybean farms account for almost half of net value added. Net value added, which is gross value added less capital consumption, is a measure of the U.S. farm sectorâ€™s contribution to our Nationâ€™s annual output of goods and services.
Farm value of production is forecast to be $271 billion in 2005, down from the record high of $279 billion in 2004. Livestock production is expected to be relatively unchanged from 2004, while the value of crop production is expected to decline by $11 billion.
For any given farm household, household income is more likely to decline in 2005, the larger the share of total household income represented by farm income. Operators of commercial farms (with sales greater than $250,000) are projected to have a 3% reduction in household income, given that commercial farm operations contribute, on average, over 70% of total farm household income. Households associated with intermediate farms, for which farming is the primary occupation of the operator and sales are below $250,000, receive a much larger share of their household income from offfarm sources. Household income on these farms is expected to be 2% higher for 2005 than 2004.
Household income of rural residence farm operators, for whom farming is not the primary occupation of the operator and sales are below $250,000, is expected to be 5% higher in 2005 than in 2004.
In 2004, the median wealth of farm households ($460,189) was much higher than the median wealth of all U.S. households ($92,265). And for every group in the Economic Research Service farm typology, including limited-resource farm operators, median wealth is higher than the median wealth of all U.S. households.
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