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Q&A on farm production expenditure data

What were the major factors contributing to the increase in farm production expenditures from 2007 to 2008?

Rising fertilizer prices and weather were two large factors affecting farm production expenditures, during the year. Fertilizer, up 27.1 percent over previous year, was the fastest expanding non-capital expense. The increased cost of crude oil continued to drive up the cost of several production inputs in 2008. This directly translated into rising fuel cost, and influenced fertilizer products, chemicals, and transportation costs. Persistent snow and rain in the Midwest in the spring set the stage for historic flooding in Iowa in June. This contrasted with driest March – May in California in 114 years.

What categories of expenses showed the largest increases from 2007 to 2008?

The largest percentage contributors to the year over year increase were Other Farm Machinery, up 34.1 percent; Tractors & Self Propelled Machinery, up 32.6 percent; Fertilizer, Lime, and Soil Conditioners, up 27.1 percent; Seeds & Plants, up 19.8 percent; Fuels, up 18.5 percent; and Rent, up 13.7 percent.

What affected such a large revision in farm expenses for 2007?

NASS revised its 2007 farm number estimates based on results of the Census of Agriculture. The estimated number of farms in the U.S. was revised 2,075,510 to 2,204,950. The data from the 2007 Agricultural Resource Management Survey (ARMS), which is the source for farm production expenditure estimates, were re-summarized and incorporated the revised farm number estimates.

Where did the largest revisions in the 2007 farm expenditures occur?

The largest revisions in expenditures occurred in the categories of livestock and poultry purchases ($6.3 billion), feed ($3.8 billion), labor ($2.6 billion), and farm services ($2.5 billion).

Where did all the additional large farms come from?

Since the 2002 Census of Agriculture, structural changes in the farm economy has resulted in trends towards more small and specialty farms and large farms and a decrease in mid size farms. In addition, record high commodity prices contributed to a shift of more farms into the higher economic sales classes. This has resulted in more farms being counted in the higher economic classes in the 2007 census of Agriculture.

Why were the expenses not accounted for in the 2007 ARMS survey?

Tabulations from ARMS incorporate farms numbers estimates published from NASS’s annual survey program. The NASS annual program relies on sampling procedures. The expenses were accounted for in the 2007 ARMS, however; the structural changes in farms that occurred rapidly over the last few years were not realized until the 2007 Census of Agriculture provided a more comprehensive measure of farm numbers. Revisions were then made to reflect these changes.

When will the 2009 farm numbers be released?

The estimated number of farms for 2009 will be published in February 2010.

Why were 2008 farm income estimates for the U.S. and States released on August 6 in advance of the date on the ERS calendar?

Production expenses used in the national and state farm income accounts correspond with those published by NASS in its Farm Production Expenditure Report. To avoid a situation where estimates and revisions to production expenditures were reported but the effect on farmers’ income could not be addressed, it made sense to release the income estimates at the same time.

Why does the release not include an update to the 2009 forecast?

The update to the 2009 forecast is scheduled for August 27. The NASS Crop Production Report scheduled for released August 12 and the WASDE report scheduled for release also on August 12 will be key ingredients to our update of the 2009 forecast since they will report crop yield and production from farm surveys for the first time for the 2009 crop year. ERS scheduled the update of the 2009 forecast to allow incorporation of data contained in these reports and other current information so that the updated forecast released in summer would be as up to date as possible regarding current production and price prospects.

Why were revisions published for 2007 and earlier years?

ERS revises previously published estimates of income and other farm financial indicators, such as the balance sheet of agriculture, to reflect the availability of new data and other information that may affect the either the level of the estimate or its distribution among States and regions. The National Agricultural Statistics Service also revises previously published estimates to reflect the availability of new data and information. The 2007 Census of Agriculture was released on February 4, 2009. The Census provided national source data for use in evaluating and/or revising previously published estimates and survey processes. These new data were incorporated into NASS’ data series and, in turn, into ERS’ estimates of net income.

Can the revisions to production expenses be expected to result in similar revisions to the 2009 forecast of expenses?

The 2008 production expenditures in the NASS report were consistent with the February forecast for 2008 and resulted in smaller than typical changes to the 2008 U.S. farm income account. Any revision to the forecast of 2009 production expenses will be based on changing economic forces that have occurred through August of 2009 that have altered either the prices paid for inputs or the quantities of inputs used in production.

What were the key factors driving the large increase in farm income in 2008?

Unusually high prices for corn and soybeans as a consequence of increased demand for biofuels production and higher prices for wheat for export demand. Prices of competing crops also tended to be higher as consumers and livestock producers sought alternatives to substitute for corn, soybeans and wheat.

What farms and regions of the country benefited most from the jump in 2008 farm income?

Producers of corn, soybeans and wheat benefited the most. Because this was a price driven market, the benefits to the regions corresponded to the volume of these crops produced. The states that are major producers of these crops are in the central part of the country (Corn Belt, Midwest).