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AUG l O l~ti6
UNIVERSITY OF llUNOIS
Federal Reserve Bank of Chicago
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Agricultural
~~ et ter

NET FARM IN::~:t ~o::: ued to surge upward
during the first half of this year. The U. S. Department
of Agriculture recently revised its forecast for the entire
year to reflect the generally higher_ level of pric~s during the second quarter. Total realized net farm income
for the year now is expected to rise to about $15. 7 billion. If this is attained, it would be about $1.5 billion
above the 1965 tally of $14.2 billion and the highest
since 1948.

Upswing in Net Farm Income Continues
billion dollars

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15

I
realized net farm income

14
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t
1950

1955

1960

1965

Gross farm income during the first six months was
estimated at an annual rate of about $48.5 billion-nearly
10 percent higher than a year earlier. The rise is attributable primarily to higher cash receipts from marketings.
Also, direct Government payments to farmers were estimated to have risen, principally reflecting the changes in
the Government cotton and wheat programs.
Through midyear, cash receipts from farm marketings
rose nearly $2.2 billion, about 14 percent, from the corresponding year-earlier period. Although prices for crops
averaged slightly below the year-ago level during the
first six months of 1966, increased marketings-in part
reflecting the large carry-over from last year's record
production-boosted cash receipts from crops about $300
million above the 1965 level. Sharply higher prices for
livestock products-up 18 percent from a year earlierand slightly larger marketings combined to yield livestock producers about $1.9 billion more in cash receipts .
Government payments to farmers participating in the
wheat and cotton programs during 1966 are expected to
boost payments under all programs to about $3.5 billionabout $1 billion greater than in 1965. The bulk of these
payments will be made during the second half of the
year. Direct payments to farmers under all programs in
1965 are expected to account for about 8 percent of total
cash receipts from the sale of farm commodities and
nearly 22 percent of net farm income.

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Number 868
Production expenses have also shown a substantial
rise during the first half of this year. Current extimates
point to a nearly $2 billion increase from the total outlays of $30.7 billion last year. This would compare with
a rise of about $1.3 billion in 1965 and with an average
annual increase during the past decade of about $750
million . Higher prices for most production items account
for much of the increase although larger amounts of some
of the more important production inputs, such as feeder
and replacement livestock, fertilizer and farm machinery,
have helped boost the total outlays. Prices paid by farmers for production items, interest on debts, taxes and
wage rates averaged about 4 percent higher during the
first six months of 1966 than a year earlier.
In the Seventh Federal Reserve District, farm income
has advanced even more rapidly than for the nation.
This reflects in large part the relative importance of
livestock production. Sales of livestock and livestock
products in the District states account for more than twothirds of the total cash receipts compared with less than
three-fifths for the nation. Cash receipts during January
through May rose about 18 percent from the corresponding
year-earlier period-receipts from sales of crops were up
about 12 percent while livestock receipts rose more than
20 percent.
Farm income in the Midwest as well as the nation is
expected to continue above year-earlier levels although
the margin over a year ago experienced during the first
half of 1966 is likely to narrow as the year progresses.
Livestock prices-which were primarily responsible for
the large increase in income during the first half of this
year-probably will average lower, reflecting the expansion in pork production and continued high levels of
cattle and broiler marketings. Income from crops may
increase somewhat because of the sharp increases in
prices in recent months, but weather conditions will continue to play a large role in determining the size of this
year's harvest.
Income of wheat and cotton growers, of course, will
be augmented by higher Government payments to farmers
participating in the respective programs.
However,
because of smaller participation by midwestern farmers in
the feed grains program, payments to Seventh District
farmers probably will total somewhat less than a year
ago.
Roby L. Sloan
Agricultural Economist