After suffering a 31-percent drop in net cash income in three years, the U.S. farm sector will see stable to modestly rising income in coming years, while farmland values will fall 11 percent before leveling off at the end of this decade, says the Food and Agricultural Policy Research Institute. The University of Missouri think tank says farm debt will rise, as will indicators of financial stress, such as the debt-to-asset ratio.
FAPRI’s analysis is slightly more optimistic than USDA’s long-term projections, released in late February. With its assumptions of moderate growth ahead for the U.S. and global economies, FAPRI says net cash income will rise 4 percent this year and continue to increase through 2022. USDA’s projects annual declines in net cash income until it stabilizes in 2020.
In either case, farm income would run at subdued levels in the near and medium term compared to the boom years of 2006-13. Producers would be constrained by lower income and slow increases in production costs. Large global stockpiles would limit the chances for major improvement in commodity prices.
“The reduction in farm income and forecasted increases in interest rates both put pressure on farm real estate values,” said FAPRI. “Projected farm real estate values decline by $339 per acre, 11 percent, between 2016 and 2020. Actual results will differ across the country and will be sensitive to developments in agricultural markets and the economy.”
Like USDA, FAPRI forecasts larger plantings of soybeans and cotton this year while growers ease back on corn and wheat, choices that reflect the relative profitability of the crops. The corn crop was forecast at 14.177 billion bushels, the third-largest on record, and soybeans at 4.036 billion bushels, the second-largest.
Crop subsidy payments will rise this year, reaching $8.4 billion and will average $7 billion over the decade. Crop insurance, the other major federal support to growers, will average $8 billion a year through 2027. When conservation and disaster payments are included, total outlays through mandatory programs would be $17.5 billion in the current fiscal year, and would average nearly $22 billion a year through for the coming decade.