Economic indicators of the farm sector.State financial summary, 1992

246 Pages·1994·19.3 MB·English

Historic, Archive Document
Do not assume content reflects current
scientific knowledge, policies, or practices.

Economic Indicators of the
Farm Sector
Economic
Research
Service
State Financial
ECIFS 12-2
Summary, 1992
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Economic Indicators of the Farm Sector: State Financial Summary, 1992. Agriculture and Rural Economy
Division, Economic Research Service, U.S. Department of Agriculture. ECIFS 12-2.
Abstract
California had the highest estimate of net farm income of any State for 1992 with $4.8 billion. Texas was
second with $3.5 billion. Farm operations in four other States produced incomes in excess of $2 billion:
Florida ($2.8), Nebraska ($2.7), Iowa ($2.5), and North Carolina ($2.5). Net farm income reflects the net
value of all goods and services produced within the year. Cattle and calves and dairy products were the
top commodities in cash receipts. Texas led cattle and calf receipts with $5.6 billion, and Wisconsin
topped dairy sales with $3.1 billion. Corn and soybeans were the third- and fourth-ranked commodities in
the nation, with Illinois and Iowa ranked first and second, respectively, in sales for both. Illinois’ receipts
for corn and soybeans were $2.8 billion and $2 billion, respectively. Hogs were the fifth-ranked
commodity, with Iowa the leading producer at $2.7 billion. California, Iowa, and Texas were the top three
States, when ranked by assets, total debt, real estate debt, or nonreal estate debt. Texas ranked first in
farm assets ($74.4 billion), California second ($68.1 billion), and Iowa third ($54.1 billion). California
ranked first in total debt ($13.1 billion), followed by Iowa ($9.9 billion) and Texas ($9.3 billion).
Keywords: Net farm income, returns to operators, farm assets, and farm debt.
Acknowledgments
This publication benefited from the critiques of Kevin Ingram, Janet Perry, and Michelle Robinson.
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Washington, DC 20005-4788 January 1994
Preface
This report is one of four segments in the Economic Indicators of the Farm Sector
series. Other reports in the series are National Financial Summary, Production and
Efficiency Statistics, and Costs of Production-Major Field Crops and Livestock and
Dairy.
This report corresponds to the national farm income and balance sheet accounts
published in Economic Indicators of the Farm Sector: National Financial Summary,
1992, disaggregated to State levels. All the income and balance sheet estimates in
these reports are based on the calendar year.
The data are based on information mainly from the U.S. Department of
Agriculture’s National Agricultural Statistics Service (NASS) and the 1987 Census of
Agriculture: United States (Vol. 1, Part 51, Nov. 1989) and ERS Farm Costs and
Returns Survey (FCRS). Additional information is obtained from other
Government agencies and, in some cases, from private sources. Revisions were
made for 1988-91. State-level farm income and balance sheet estimates for 1992
are published for the first time.
Additional information about cash receipts by State and commodity can be found in
the annual report, Ranking of States and. Commodities by Cash Receipts, published
annually by ERS, USDA.
Cash receipts, the most variable of the major components of farm income, are
often used as an indication of conditions in the farm economy prior to the
availability of an estimate of net farm income. Estimates of cash receipts are
available monthly. For further information, contact Linda Farmer on (202) 219-
0804.
This publication was prepared by the staff of the Farm Income Estimation Section
and the Farm Financial Analysis Section, Farm Sector Financial Analysis Branch,
Agriculture and Rural Economy Division, Economic Research Service.
Principal contributors and information sources:
Branch chief: Jim Johnson . [phone]
Farm income: Roger Strickland . 219-0804
Cash receipts—Bob Williams, Cheryl Steele . 219-0804
Government payments, CCC loans-Pat Vines . 219-0804
Production expenses-Christopher McGath . 219-0804
Farm-related income-Linda Farmer . 219-0804
Balance sheet: Duane Hacklander. 219-0798
Assets-Ken Erickson, Charles Barnard . 219-0799
Debt—Jim Ryan. 219-0798
Returns to equity-Ken Erickson . 219-0799
Farm financial ratios—Ken Erickson . 219-0799
Support group:
Computer—Helen Devlin, Janusz Kubica
Computer assistance—Jackie Ross
Statistical assistance—Flossie Dingle, Connie Dixon
Managing editor: Jim Carlin.219-0512
Publication coordinator: Cheryl Steele . 219-0804
u
Contents
Page
Highlights . iv
List of Tables. vii
Background . 1
State Income Accounts . 1
Comparisons with Tax Data . 1
Data Sources and Estimation Methods . 2
Net Farm Income. 3
Returns to Operators . 3
Net Cash Income . 3
Net Business Income . 3
Farm Operator Household Income. 3
State Balance Sheet Accounts . 5
Real Estate Assets . 6
Nonreal Estate Assets. 7
Debt. 8
Real Estate Debt . 8
Nonreal Estate Debt. 9
Nominal and Real Capital Gains. 10
Farm Financial Ratios . 11
Improvements and Additions to the Accounts . 11
Statistical Tables
State Farm Income Statistics. 16
State Farm Balance Sheet Statistics. 177
Farm Financial Ratios . 213
Appendix . 223
iii
Highlights
A key factor affecting farmers’ net farm income in 1992 was the weather, which
was, for the most part, extremely favorable with adequate rain and an absence of
seasonal high temperatures in summer and early fall. These below-average
temperatures eliminated the heat stress that often inhibits production of fall crops
and livestock.
Corn yields jumped to a record-shattering 131 bushels per acre, and yields were
high for all crops harvested in both summer and fall. Corn and soybeans had
record-setting harvests in 1992, boosting cash receipts for crops to an all-time
high. (The combination of cash receipts and inventory change reflects annual
value of the sector’s commodity production.) Corn and soybean prices declined in
the second half of the year as the size of the harvest became apparent, but held
up surprisingly well because of favorable demand conditions. Milk production was
up 2 percent in 1992 as output per cow more than offset a decline in the number
of dairy cows. The mild temperature conditions in late summer and early fall that
contributed to the record harvest of fall crops also reduced the heat stress on
cows mitigating the seasonal decline in the yearly milk production cycle.
Cash receipts were $171.2 billion, up from $168.7 billion. California led the
Nation with $18.2 billion in cash receipts from all commodities. California’s five
top commodities in sales-dairy products, greenhouse and nursery products,
grapes, cattle, and cotton-accounted for 47 percent of the State’s cash receipts.
California led the Nation in crop sales with $13.2 billion, and was the top
producing State for six commodities: greenhouse and nursery products, cotton,
eggs, hay, grapes, and lettuce. The State ranked fourth in livestock commodity
receipts at $5.1 billion. While Texas ranked second overall in cash receipts, with
$11.6 billion in sales, it was first in livestock receipts ($7.5 billion) and fifth in
crop receipts ($4.1 billion). Texas was also the leading producer of cattle and
calves and grain sorghum. Iowa ranked third in cash receipts, with $10.3 billion,
third in livestock sales and fourth in crop sales. Nebraska was the fourth leading
agricultural State, with $8.8 billion in total sales, while Illinois ranked fifth, at
$7.6 billion. Iowa was the leading producer of hogs, and Illinois grew the most
corn and soybeans. As in 1991, California, Texas, Iowa, Nebraska, and Illinois
ranked as the top States in cash receipts for all commodities. These rankings
reflect the size of the State, the proportion of its land that can be cultivated, the
fertility of the land, and the State’s comparative advantage in producing and
marketing high-valued commodities.
Net farm income was $48.6 billion, up from $40 billion. This measure of the farm
sector’s net value of production is the net farm product. Corn, as both the
Nation’s most important crop and the one most sensitive to weather conditions,
serves as a barometer of production for the entire agricultural sector. Thus, when
the corn harvest is a recordbreaker, net farm income can be expected to follow
suit. The six leading States in net farm income were California ($4.8 billion),
Texas ($3.5 billion), Florida ($2.8 billion), Nebraska ($2.7 billion), Iowa ($2.5
billion), and North Carolina ($2.5 billion). Production expenses incurred in
producing the net farm income were $149.1 billion, down less that 1-percent. The
leading States in production expenses were California ($14.8 billion), Texas ($10.8
billion), Iowa ($9.6 billion), Illinois ($7.6 billion), and Nebraska ($7.3 billion).
The were no changes in the composition or the ranking of the top nine states
from a year earlier.
Returns to operators, which differ from net farm income by the amount of net
rent to operator dwellings as a result of excluding all income and expenses related
to operator dwellings in the farm sector, were up 21.8 percent in 1992 to $47.4
billion. California led all States in returns to operators, at $4.8 billion, followed by
Texas ($3.3 billion), Florida ($2.8 billion), Nebraska ($2.7 billion), and North
Carolina ($2.4 billion). Neither factor payments nor nonfactor payments changed
significantly, thus the jump in returns to operators is a reflection of the very large
crop harvests.
IV
Net cash income represents earnings that are available for principal repayment,
capital purchases, and family living expenses. While not a direct measure of
production, net cash income is, nevertheless, influenced by production levels. With
almost no change in production expenses in 1992, net cash income was higher in
1992. Its percentage increase was less than that of net farm income because it
does not reflect the large additions to end-of-year inventories, which is typical of
years with significant increments in production. Farmers tend to put large
quantities in storage, anticipating or hoping for a rise in price after a few months
when the markets have had time to adjust to the abundant supply. Net cash
income from farming was $57.7 billion, up 8.2 percent from $53.3 billion in 1991.
The rise in cash income was due almost entirely to higher receipts from the sale
of crops and dairy products and Government payments. Net cash income is
virtually identical to what it was in 1987 and has consistently remained in a
narrow $53-billion to $57-billion range for 6 years. Farmers manage then-
business activities to ensure stability in the cash-flows of their respective
operations. For example, when droughts occur in nonconsecutive years, farmers
can adjust inventories to manage their cash income despite the variability in
production reflected in net farm income. Volatility can contribute to debt
payment problems and payment of more income taxes with a progressive rate
structure. The farm sector’s liquidity and debt-servicing ability have improved
since the mid-1980’s because of increased net cash income from farming and lower
levels of farm debt.
Net cash income from farming was highest in California ($5.6 billion), followed by
Texas ($4 billion), Florida ($3 billion), Nebraska ($2.9 billion) and Iowa ($2.7
billion). The top earners in 1991 were California, Texas, Nebraska, Florida, and
Iowa.
Net business income tracks net cash income closely, but at a lower level,
reflecting the additional noncash deduction for capital consumption, which has
changed little in recent years. Net business income was $4.4 billion higher in 1992,
identical to the change in net cash income due to a near negligible increase in
capital consumption. The rise in net business income represented a 11.4-percent
increment. California led all States with $4.8 billion, followed by Texas ($2.9
billion), Florida ($2.8 billion), Nebraska ($2.3 billion) and North Carolina ($2.3
billion). In 1991, the composition and ranking of the top five States was the
same.
The farm business balance sheet, improved in 1992. The value of farm assets
increased $19 billion during 1992, after first declining slightly during 1991. Farm
debt remained constant. The increase in farm asset value and the constant farm
debt resulted in a farm equity level of $723 billion. The rates of return on assets
and equity from current income were strong in 1992 at 4 and 3.5 percent,
respectively.
The value of farm business assets increased to $861.5 billion as of December 31,
1992, 0.2 percent above the previous year. Real estate values strongly affected
total farm assets because the value of farm real estate accounted for 73 percent of
total farm asset value in 1992. The States with the highest farm asset values were
Texas, at $74.3 billion, California ($68.1 billion), Iowa ($54.1 billion), Illinois
($50.8 billion), and Nebraska ($36.1 billion).
Farm business debt was $138.6 billion, essentially unchanged from the year
before. Real estate debt rose, while nonreal estate debt fell. California was the
leading State in total debt, at $13.1 billion, up from $13.0 billion in 1991. Iowa
was second at $9.9 billion, up from $9.8 billion. Texas ranked third, at $9.3
billion, down from $9.6 billion in 1991; Illinois was fourth at $7.4 billion, up
from $7.3 billion in 1991; and Nebraska followed with $6.9 billion, up from $6.6
billion.
v
Equity fell $19.4 billion to $722.9 billion. Texas registered the largest equity, at
$65.1 billion, followed by California ($55.0 billion), Iowa ($44.1 billion), Illinois
($43.5 billion), Nebraska ($29.3 billion), and Minnesota ($28.8 billion).
The debt-to-asset ratio provides insight into the collateral security of loans (a
security pledged against the performance of a contract), the relative indebtedness
of the farm business, and the risk borne by lenders. The farm business
debt-to-asset ratio fell to 16.1 percent from 16.5 percent by the end of 1992.
Delaware had the highest debt-to-asset ratios, at 22.2 percent, followed by
Arkansas (21.1), Idaho (20.9), Mississippi (20.7), Louisiana (20.4), and Wisconsin
(19.6).
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