Despite crop revenue drops, two measures suggest 2013 will be the third straight year of high income for farmers, Westhoff said.
Net farm income in 2013 could reach the highest level since the early 1970s, even after correcting for inflation.
The other indicator, net cash income, declines in 2013. The two measures differ because net farm income includes changes in the value of inventories, and bigger crops should boost the amount of grain owned by farmers at year-end.
Federal crop insurance plays into a bump in income. The drought coverage payments exceed usual program payments from the federal Commodity Credit Corporation.
For the baseline, FAPRI assumes continuation of current farm law. That could mean CCC outlays of about $9 billion per year over the baseline. About $6 billion goes to major crop programs.
While revenues are high, farm input costs rose by 55% over the last six years, far higher than overall inflation. However, feed costs are expected to decline if 2013 brings average crop yields. Increased input costs moderate then slowly rise through 2022.
Both oil and natural gas prices dropped in the recession. However, oil prices rebounded and remain high, while natural gas prices dropped and stay well below pre-recession levels. Fertilizer prices increase, but remain below 2008 peak levels.
In land use, good planting-time weather and high prices pulled another 10 million acres into crops in 2012. Total planted area remains high in 2013, but declines with lower prices in 2014. Conservation Reserve acreage drops again in 2013.
The analysis is included in "U.S. Baseline Briefing Book: Projections for Agricultural and Biofuel Markets." The 50-page book was prepared by the team of MU FAPRI and Agricultural Markets and Policy in the MU College of Agriculture, Food and Natural Resources.
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Source: University of Missouri Extension