United States net farm income is projected at $95 billion for 2012, down from $98 billion in 2011, by a report to Congress from the Food and Agricultural Policy Research Institute (FAPRI).



“While net farm income may fall a little short of last year, we expect 2012 to be another good year for most producers,” said Pat Westhoff, director of FAPRI at the University of Missouri-Columbia.



Corn yields dropped below trend line the last two years, reducing carryover stocks and pushing up prices. “With normal weather, a bigger crop in 2012 may lead to lower prices this fall,” Westhoff said. “Other crop prices tend to follow corn.”

 

The annual MU FAPRI baseline was presented to the U.S. Congress on March 5. The baseline, extending 10 years, provides a measure for analyzing proposed changes in farm policy.



Trend-line yield for the 2011 season was 160 bushels per acre. However, actual production was 148 bushels.

 “Crop prices would be a lot lower today if we had not had back-to-back years of below-trend corn yields,” Westhoff said.



FAPRI projects planted corn acres this year at 93.5 million acres, up from 91.9 million last year. An assumed normal yield in 2012 reduces per-bushel price to $4.81, down from $5.96 for 2011-12 market year.



Ethanol production is projected to remain at 2011-12 levels after years of rapid growth. An end of the 45 cents per gallon tax credit, high corn prices and constraints on ethanol used in conventional 10-percent blends contribute to slower growth.



Soybean prices for 2012 remain over $11 per bushel, after averaging an estimated $11.61 for 2011-12. “Soybeans must remain strong to be competitive with corn for acreage,” Westhoff said.



“Given current tight corn supplies, markets will be sensitive to news about 2012 supply-and-demand prospects,” Westhoff said.