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The U.S. Farm Economy

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According to USDA's Economic Research Service (ERS), national net farm income -- a key indicator of U.S. farm well-being -- is expected to rise 10% in 2007 on the strength of higher commodity prices, which, in turn, are being driven largely by the rapidly growing demand for corn as a feedstock in ethanol production.1 Net farm income is forecast at $66.6 billion, up from $60.6 billion in 2006, as projected record agricultural cash receipts of $258.7 billion (up $16 billion) more than offset higher production expenses and a decline of nearly $4 billion in government payments.

Crop and livestock receipts are both projected to reach record levels in 2007 of $133.5 billion and $125.2 billion, respectively. While higher prices are behind the surge in crop receipts, mostly steady prices and larger output account for the livestock sector's increased value. The projected rise in crop prices is expected to reduce pricetriggered marketing loan benefits and counter-cyclical payments, leading to lower total government payments. In addition, the rise in cash receipts is expected to be partially offset by record high production expenses of $251.3 billion (up nearly 6%).

Total farm asset value of $1,994 billion and total farm debt of $235 billion are both projected at record levels in 2007. However, the debt-to-asset ratio of 11.8% equals last year's value and represents the lowest level since 1960, suggesting a strong financial position for the agricultural sector as a whole. This report will be updated as events warrant.