USDA: “Dips in Farm Sector Profitability Expected Into 2016”

Jesse Newman reported yesterday at The Wall Street Journal Online that, “Income for U.S. farmers will fall 17.2% this year to a seven-year low, as falling livestock revenues add to pressure from lower grain prices across the Farm Belt.

The Agriculture Department on Wednesday said net farm income will drop to $66.9 billion, its lowest point since 2009 and the third consecutive decrease since farm profits hit record highs in 2013.

“The forecast points to a continued decline in the U.S. agricultural economy, prompted by four straight years of bumper corn and soybean harvests as well as record global grain supplies.”

Specifically, USDA’s Economic Research Service (ERS) indicated that, “Net cash farm income is forecast at $90.1 billion and net farm income at $66.9 billion for 2016. Both measures are forecast to decline for the third consecutive year after reaching record highs in 2013 for net farm income and 2012 for net cash income. Net cash farm income is expected to fall by 14.6 percent in 2016, while net farm income is forecast to decline by 17.2 percent. These declines follow the 19.8- and 12.7-percent reductions in net cash income and net farm income, respectively, that occurred in 2015.”

Graph From USDA-ERS

Yesterday’s ERS report noted that, “Overall, cash receipts are forecast to fall $23.4 billion (6.2 percent) in 2016 due to a $23.4-billion (12.3 percent) drop in animal/animal product receipts; crop receipts are forecast essentially unchanged from 2015.”

In addition, ERS stated that, “Direct government farm program payments are forecast to rise by 19.1 percent in 2016 to $12.9 billion (see table on government payments). The Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) programs are expected to account for 64.4 percent of all program payments.”

Graph From USDA-ERS

Meanwhile, with respect to production expenses, the ERS report stated that, “After reaching record highs exceeding $390 billion in 2014, farm production expenses are forecast to dip for the second consecutive year in 2016.”

Graph From USDA-ERS

Separately yesterday, ERS indicated that, “The median income of U.S. farm households increased steadily over 2010-14, reaching an estimated $81,637 in 2014. After dipping in 2015 to $76,735, median household income is forecast to remain essentially unchanged in 2016, at an expected $76,839. Median farm income earned by farm households is estimated to be -$765 in 2015 and forecast to be -$1,412 in 2016. In recent years, slightly more than half of farm households have lost money on their farming operations each year; most of these households earn positive off-farm income—median off-farm income is forecast to increase 2.7 percent, from $67,500 in 2015 to $69,317 in 2016.”

Graph From USDA-ERS

And in a statement yesterday, USDA Secretary Tom Vilsack noted that, “As we saw in the August forecast, the estimates again show that debt to asset and debt to equity ratios — two key indicators of the farm economy’s health — continue to be near all-time lows, and more than 90% of farm businesses are not highly leveraged. Median household income for farming families remains near historic highs and is expected to remain stable relative to 2015. In 2016, higher off-farm earnings are expected to help stabilize losses due to low commodity prices.”

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