Oregon farm income is dropping

By Oregon Department of Agriculture

Last year fails to match 2011’s impressive bottom line despite good prices & production

Oregon farmers and ranchers fell short last year of 2011’s near record net farm income, but many sectors of the state’s agricultural economy did well in 2012. Despite a 5.2 percent drop in the overall bottom line for producers, Oregon’s net farm income continues a general trend of recovery from the dark days of recession.

“We saw a huge increase from 2010 to 2011 and got back up to where we would like to be with net farm income,” says Stephanie Page, analyst with with Oregon Department of Agriculture. “We weren’t all that far off last year. Although you never like to see a drop in the numbers, I don’t think a 5.2 percent decrease after such a big year is that much of a concern.”

A newly released economic snapshot of Oregon agriculture shows net farm income at nearly $960 million in 2012. That’s a drop from the $1.01 billion mark recorded in 2011 but a huge improvement from the $452 million recorded in 2010. Oregon’s net farm income began a downward slide during the national recession that ran through 2009 following 2004’s record high of $1.14 billion.

Net farm income balances production value– which reflects the prices paid to growers for what they produce– with expenses. It is the amount retained by agricultural producers after paying all business-related expenses and is considered an important indicator of the agricultural economy’s overall health. Think of it as the farmer’s paycheck. Out of that paycheck, growers make payments on land purchases, family living expenses, and family health insurance. Statistics provided by the U.S. Department of Agriculture’s Economic Research Service (ERS) show net farm income is cyclical. They also show that the average payout for Oregon farmers and ranchers may not be as high as you would expect from a net farm income that has hovered around a billion dollars the past couple of years.

“You have to remember that the net farm income is spread over all producers,” says Page. “The average take home pay for Oregon farmers and ranchers is about $25,000. Some obviously net much higher than that, others bring home less. Much of that depends on the size of the operation and what is being produced. But even the past two years with a healthy bottom line for the state, our producers are not necessarily making as much as we’d like to see.”

In fact, Oregon ranks 31st of all states in net farm income and lower than neighboring states California, Idaho, and Washington.

Nonetheless, there were plenty of bright spots on the production side of the equation with many commodities enjoying good yields and strong prices. The overall value of production increased again last year with both crop production and livestock showing higher cash receipts. Crops increased by 3.7 percent to $3.39 billion in 2012 while livestock rose 2.6 percent to $1.4 billion.

“We had a great year for wine grapes, which had a record high for cash receipts last year, and a near record for pears,” says Page. “Among grass seed crops, fescue had an outstanding year. On the flip side, we saw some decreases for milk and blueberries, although it would have been hard to improve on the record setting blueberry year we had in 2011.”

Cattle and poultry more than offset the significant drop in cash receipts for dairy products last year. Conversely, a sizable drop in hay cash receipts tempered the gains made by other crops in Oregon.

The slight overall increase in production value was offset by expenses paid by operators. Last year, that figure reached $4.4 billion. Reigning in costs to the producer remains a major challenge that keeps the net farm income number from being better in Oregon.

“Generally, expenses held fairly steady last year,” says Page. “Feed costs were lower, which was great news for livestock producers, but they are still very high compared with prices over the past 20 years. The costs of seeds and pesticides were higher last year, but fuel costs were lower. So again, there wasn’t a big change in expenses from 2011 to 2012.”

The major expense for farms and ranches in Oregon continues to be labor. In fact, overall labor costs continue to be higher than net farm income. Last year, that expense reached $1.09 billion, a 1.8 percent increase over 2011’s labor costs.

The 2012 figures for Oregon’s neighbors show that they continue to enjoy an overall much higher net farm income. Washington is ranked #18 in the nation at $2.1 billion. Idaho is even better, ranked #14 in net farm income at $2.7 billion. Agricultural giant California continues to lead the nation in net farm income at $16 billion. For a variety of reasons, Oregon agriculture lags behind its neighbors. Some of that is related to water access for irrigation and some to the types of crops and size of farms located in the state. Oregon has a higher percentage of small farms that generate less than $10,000 a year than Washington, Idaho, and California.

Nationally, net farm income decreased 3.6 percent in 2012– very comparable to Oregon’s decrease of 5.2 percent. ERS does forecast 2013 to be a bounce back year with an estimated US net farm income of more than $120 billion. If Oregon follows suit, that would be welcome news.

“We like to look at longer trends rather than just every year, so we think the outlook is good for Oregon’s net farm income, especially if producers can contain those costs,” says Page. “There continues to be strong interest and demand for Oregon agricultural products, both domestically and internationally.”

It will be late summer of 2014 before this year’s balance sheet is finalized. So far, it looks like many commodities are once again doing well. As usual, Oregon’s diversity in agriculture will produce winners and losers on an annual basis. But in most cases the past few years, there have been more commodities showing increased production value than those showing a decrease. Hopefully, when the final numbers are in for 2013, that will continue to be the case.

For more information, contact Stephanie Page at (503) 986-4558.

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