Farm income, costs spiral across West

Mitch Lies, Capital Press 9/3/08

Farm incomes followed higher crop prices into record-setting territory last year, but higher expenses put a damper on the region's bottom lines.

Oregon's net farm income jumped 50 percent in 2007, while Washington's jumped 133 percent and Idaho's followed with a 101 percent increase, all reflecting record-high prices paid for commodities such as wheat. California's net farm income increased 60 percent.

But state agriculture officials said rising family-living expenses, which are not reflected in the numbers, are keeping profits low.

"On the surface, our latest net farm income number is incredible and shows just how valuable the agriculture industry is to Oregon's economy," said Katy Coba, director of the Oregon Department of Agriculture. "However, expenses continue to rise for all producers."

The numbers, released recently by the USDA's Economic Research Service, put Oregon's net farm income at a record $1.48 billion. It marked the fourth time the state's net farm income topped $1 billion. The previous record was $1.2 billion, recorded in 2005. Oregon net farm income dipped to $985 million in 2006.

Nationwide, net farm income was a record $86.8 billion in 2007, up $28 billion from 2006 and more than $29 billion above its 10-year average of $57.5 billion. The previous record of $85.8 billion was set in 2004.

Net farm income is the amount retained by farmers after paying all business-related expenses. The number does not account for payments on land purchases and living expenses, including health insurance costs. Still, net farm income is considered an important indicator of farming's economic health, according to Bruce Pokarney, spokesman for the Oregon Department of Agriculture.

Big gains in production value in 2007 were made in food grains, which include wheat, and fruits and vegetables. Food grains were up 55 percent over 2006 while fruits and vegetables were up 20 percent over 2006, and up nearly 40 percent over their value from three years ago.

Labor was by far the biggest expense, according to the figures. Oregon farmers shelled out $912 million in labor expenses in 2007.

Feed expenses also showed a significant increase, experiencing a 25 percent bump since 2005.

Many of the increased expenses could have been much higher were it not for farmer conservation, said ODA analyst Brent Searle.

"Producers are cutting back on purchases when they can and manage their operations with better equipment, monitor closely what they use and conserve when possible," Searle said.

Money paid out by producers for fertilizer, for example, went up 12 percent in Oregon, while fertilizer prices tripled between 2006 and 2007. Farmers also increased conservation efforts in petroleum fuel and electricity. Fuel and utility prices increased about 50 percent between 2006 and 2007, but farmer fuel and utility costs increased only about 10 percent.

Total value of agricultural production in Oregon in 2007 was just under $4.5 billion, with crop production accounting for $3.3 billion and livestock production accounting for $1.12 billion.

The USDA forecasts net farm income at $95.7 billion in 2008, with crop production value projected at a record $188.8 billion - $38 billion more than the previous record level, which was set in 2007.