The USDA announced on Monday that net farm income for 2011 is expected to be $94.7 billion, up 19.8% from 2010 due to rising grain prices, partially offset by higher production costs. 2011 net farm income is the second highest inflation-adjusted value recorded in the last 35 years.

Sales of corn for grain are expected to increase 23% in 2011 and to be roughly 87% of 2011 feed crop receipts. The quantity of corn sold in 2011 is expected to decline slightly, but will be more than offset by an estimated $1.09 per bushel increase. Increased demand for corn in 2011 is primarily driven by higher ethanol production and exports.

Sales of soybeans are expected to increase roughly 27% in 2011, driven by a 5.5% increase in sales and an expected rise in price of over $2 per bushel. Soybean exports are expected to reach record levels due to high foreign demand.

Production costs for 2011 are expected rise 7% to $307.5 billion. Total expenses are forecasted to be 77% of gross farm income, down 1% from 2010. The USDA expects fertilizer expenses to rise 14% due to an increase in the number of acres planted and an 11% rise in fertilizer prices. Pesticide expenses will rise 7.2% and prices paid for fuel 13%.

Government payments are expected to decline 12.7% in 2011 to $10.6 billion. The decline is primarily due to producers enrolling in the ACRE program and the estimate of no countercyclical payments being made in 2011.

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