Weaker commodity prices across the board are pulling down farm income, the government said in lowering its forecast of net cash income 7 percent from its Aug. 25 estimate. The USDA now expects net cash farm income – a measure of solvency – to be $93 billion this year. It would be the lowest figure since $74.3 billion in 2009 and a 28-percent plunge from last year.
From corn and cattle to soybeans and sugar beets, more than 96 percent of the fall-off this year is due to falling prices rather than lower production. Crop receipts are forecast to fall 8 percent and livestock receipts 12 percent from 2014 figures. Market prices for corn, wheat and soybeans have declined sharply from record highs in 2012 due to huge crops. Cattle, hogs and chicken prices set records last year but are falling now as supplies expand.
Along with the drop in income, farmland is expected to fall modestly in value and indicators of financial stress in the farm sector will rise, said the USDA’s Farm Income Forecast, issued three times a year.
Farmland, which accounts for 80 percent of farmers’ assets, was forecast to drop in value by 2 percent. The debt-to-asset ratio would rise to 12.8 percent, up 1.1 points from 2014 and the highest reading since 2009. “However, debt-to-asset and debt-to-equity ratios remain low relative to historical levels,” said the report.
Farm income has waned since hitting modern-day highs in 2012 and 2013. Commodity prices are expected to run at comparatively low levels for the next couple of years at a minimum. The USDA will make its first forecast of 2016 farm income on Feb. 9.
Besides the drop in net cash farm income, the USDA forecast a 38-percent drop in net farm income, which is a measure of wealth because it includes the value of grain or livestock held on the farm. It would be the largest single-year decline in net farm income since 1983. Net farm income is more volatile than net cash farm income because operators can manage the timing of crop and livestock sales and the purchase of inputs to stabilize their cash receipts.