CHICAGO — Even after the worst drought in a half century shriveled crops from Ohio to Nebraska, U.S. farmers are having their most profitable year ever because of record- high prices and insurance claims.
Farmer income probably will jump 6.9 percent to $144 billion, exceeding the government’s August estimate of $139.3 billion, said Neil Harl, an economist at Iowa State University. Parched fields that drove corn, soybean and wheat futures as much as 68 percent higher since mid-June mean insurance payouts may more than double to $28 billion, according to Doane Advisory Services, a farm and food-company researcher in St. Louis.
“Crop insurance was a savior this year," said Kyle Wendland, 29.
Corn yields plunged 36 percent and soybean output dropped 11 percent on the 1,030 acres Wendland farms near Fredericksburg, Iowa. “It was the difference between making a profit or sustaining a loss."
Farming accounted for 0.9 percent of the U.S. economy last year, generating 11 percent of total exports and employing 2.635 million, Bureau of Economic Analysis data show. Deere & Co., the world’s largest agricultural equipment maker, Wednesday boosted its 2012 forecast of U.S. farm cash receipts to $388.2 billion and predicted a 3.7 percent gain next year to $402.5 billion.
Midwest farmland values rose by 13 percent to a record in the third quarter, and spurred sales of Monsanto seeds, Deere tractors and CF Industries Holdings fertilizer. Costlier grain eroded profit for pork producer Smithfield Foods and restaurant owners including Texas Roadhouse. The government is predicting food inflation will accelerate next year, led by meat, dairy and baked goods.
The Standard & Poor’s GSCI Agriculture Index of eight farm products gained 9.3 percent this year. Wheat soared 32 percent to $8.615 a bushel on the Chicago Board of Trade, corn advanced 15 percent to $7.435, and soybeans added 17 percent to $14.0825. That contrasts with an 8.4 percent gain in the MSCI All-Country World Index of equities, and a 2.4 percent return on Treasuries, a Bank of America Corp index shows.
While smaller harvests are reducing supplies from the U.S., the biggest agricultural exporter, slowing demand growth and more production in other nations are easing the impact. The United Nations says the global cost of food imports will drop 10 percent to $1.136 trillion this year, and its gauge of world food prices is 10 percent below the record set in February 2011.
Production of corn, the biggest U.S. crop, fell 13 percent to 272.4 million metric tons, the lowest since 2006, the Department of Agriculture estimates. In the two months from mid- June, prices surged as much as 68 percent on the Chicago Board of Trade to a record $8.49. Crops withered in the U.S. as Midwest states went without rain for most of July and August and temperatures set heat records going back more than a century.
Soybean output fell 4 percent to 80.86 million tons, driving futures to an all-time high of $17.89 on Sept. 4. Wheat prices reached a four-year high of $9.4725 on July 23, and the condition of the winter crop on Nov. 18 was the worst since at least 1985, threatening output of grain that will be harvested in June.