Farm production expenses set record

Farm production expenses set record

Feed costs account for largest expenditure category with seed and chemical costs making up 27.8% of total crop expenses.

FARMERS spent a record $351.8 billion on agricultural production in 2012, a 10.4% increase from 2011 (Table), according to the latest data from the U.S. Department of Agriculture's National Agricultural Statistics Service (NASS).

NASS showed a 17.4% increase in crop production spending versus a relatively small 2.4% increase in livestock production expenses.

Crop production accounted for the majority of production expenditures in 2012, at $200 billion. Expenditures increased in every production category except interest.

Low interest rates boosted new machinery purchases in 2012 and increased overall farm expenditures for the year, NASS noted. Spending on chemicals, fertilizers and seeds tallied $55.5 billion last year, accounting for 27.8% of total expenses for crop farms.

Chemical costs increased 16.1% year over year, seed costs increased roughly 14% and fertilizer costs grew 13.5%. By individual category, the largest expenditures for crop producers were rent ($25.0 billion), farm services ($24.9 billion) and fertilizer, lime and other soil conditioners ($24.8 billion).

Overall, the four largest categories totaled $161.8 billion and accounted for 46% of total expenditures in 2012. Feed costs were the single largest category at 16.8% of total expenditures, followed by farm services at 11.3%, livestock, poultry and related expenses at 9.1% and labor at 8.8%.

In the livestock sector, farmers spent $152 billion, up just 2.4% from 2011. The largest expenditure for livestock farms was feed, on which the producers spent $54.4 billion in 2012.

The historic 2012 drought reduced feed availability and doive prices higher last year, making it the costliest category in the entire agriculture sector.

Regionally, the Plains saw the largest increase in production expenditures, up $15 billion from 2011. In 2012, total expenditures by region were: $112.0 billion in the Midwest, $88.8 billion in the Plains, $69.9 billion in the West, $42.6 billion in the Atlantic and $38.6 billion in the South.

Per farm, average expenditures totaled $162,743, compared with $146,653 in 2011, an increase of 11%. On average, U.S. farm operations spent $27,338 on feed, $18,457 on farm services, $14,802 on livestock, poultry and related expenses and $14,247 on labor.

 

Consolidation

Farm production expenses set record
While observers have discussed consolidation trends in the livestock industry for many years, the same public discussion has rarely been applied to crop farms. Terms like "factory farm" or "industrial agriculture" are almost exclusively reserved for livestock operations.

Even so, consolidation does appear to be occurring in the crop production sector as well. According to data from USDA's Economic Research Service (ERS), the number of midsize crop farms has declined sharply in recent years, while farm numbers at the extremes (large and small) have grown.

"As a result, the size of the average farm (in acres) has changed little, but large farms have gotten considerably larger," ERS noted. "Simple means and medians focus on the average farm, but relatively few cropland acres are on average-size farms. While the average (mean) number of acres planted by crop farms has changed little in the last three decades, the midpoint acreage of both planted and harvested cropland has increased dramatically, from roughly 500-600 acres in 1982 to roughly 1,100 acres in 2007" (Figure).

In a report, ERS concluded that large farms now dominate crop production in the U.S. Although most cropland was operated by farms with fewer than 600 crop acres in the early 1980s, most cropland today is on farms with at least 1,100 acres, and many farms are 5-10 times that size.

To some extent, this trend — and similar trends in the livestock sector — are reflected in the farm expenditures data: 33% of 2012 farm expenditures were incurred by farms with $1.0-4.9 million in economic sales, an increase of 27.5% from 2011 (Table).

Farms with more than $5 million in economic sales, meanwhile, incurred just more than 20% of total U.S. farm expenses, tallying $71.6 billion, an increase of 22.8% from the previous year. By contrast, farms with less than $250,000 in sales incurred just 22% of total farm expenses last year, down slightly from 2011.

While "big farms" may be the dominant players in the agriculture industry, ERS noted that the overwhelming majority of farms are family-owned operations. In 2011, 96% of U.S. crop farms were family farms, and they accounted for 87% of the value of crop production.

 

U.S. farm production expenditures, economic class gross sales, by percent of total, average per farm and total

 

 

 

 

-% of total-

-Avg. per farm-

-Total expenditures-

Economic class

2011

2012

2011

2012

2011

2012

gross sales

-%-

-$-

-Billion $-

Less than $10,000

5.7

5.1

15,122

15,404

18.080

17.980

$10,000-49,999

4.8

5.1

34,894

40,207

15.320

17.910

$50,000-99,999

4.3

4.2

85,558

94,933

13.590

14.670

$100,000-249,999

8.2

7.8

179,685

186,646

26.110

27.590

$250,000-499,999

12.1

10.7

382,791

370,025

38.570

37.650

$500,000-999,999

17.9

13.5

711,208

689,481

57.110

47.650

$1.0-4.9 million

28.8

33.2

1,920,352

1,695,065

91.620

116.790

$5 million-plus

18.3

20.3

11,095,238

10,211,127

58.250

71.580

Total expenditures

100.0

100.0

146,653

162,743

318.650

351.820

Source: U.S. Department of Agriculture.

 

 

 

Volume:85 Issue:32

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