The worst U.S. drought in more than five decades is forecast to raise farm profits to a record $122.2 billion this year as higher prices and insurance payments outweigh crop losses from the dry conditions.
Income will rise 3.7 percent from a revised $117.9 billion in 2011, the U.S. Department of Agriculture said today in a report on its website. The forecast is up from $91.7 billion in February. The value of crops will rise 6.7 percent to $222.1 billion, an all-time high, while revenue from livestock sales will decrease 0.1 percent to $165.8 billion, the USDA said. Expenses such as diesel fuel and animal feed will increase 6 percent to $329.1 billion.
Pressured by the prospect of higher prices, corn futures surged 58 percent since mid-June before today, soybeans were up 31 percent and wheat 41 percent. The drought may push food inflation as high as 4 percent in 2012, the USDA said last week. The department has declared natural disasters in more than 1,800 counties in 35 states, more than half of the country’s total, mostly because of the dry, hot weather.
Farm-related income, which includes government-backed crop insurance, will total $34.5 billion, compared with $26.1 billion last year and $19.9 billion estimated in February, the USDA said.