U.S. farm income is on the express elevator going down, according to a quick review of USDA forecasts. It expects a 32-percent decline in net farm income this year, to the lowest level since 2009. Economist David Widmar says, “What is often overlooked is how the 2015 net farm income forecast fits into the long run.” Adjusted for inflation, the USDA’s forecast “is nearly on par for the long-term average” since 1929, with 44 of 87 years showing a lower income than is forecast for this year, writes Widmar at the Agricultural Economics Insights blog. “The argument can be made that things are returning to more normal levels” after several extraordinary years.
“Another key factor to watch is how the sector adjusts to lower farm incomes,” said Widmar. Agricultural real estate values, which are widely expected to soften, will be particularly significant. If farm income is returning to normal levels, “real estate values likely need to be driven by expectations of future income more like the current situation than the income levels associated” with the peak years of 2011-14.