Farm income stabilizes a bit, but financial stress edges upward

U.S. farm income is higher than expected this year and is regaining its footing after taking a tumble early this decade, said the Agriculture Department on Thursday. Nonetheless, net farm income this year will be the lowest since 2006, and the debt-to-asset ratio, an indicator of financial health, is rising for the sixth year in a row.

The Economic Research Service forecast net farm income of $65.7 billion this year, slightly more than half of the record $123.8 billion in 2013 in the final days of the commodity boom. That’s $6.2 billion higher than the previous forecast, in February, because of higher crop and livestock revenue, the same reason that the USDA raised its estimate of 2017 farm income by $12 billion, to $75.5 billion.

USDA economist Carrie Litkowski said the trend line for farm income “is relatively flatter.” Asked during a webinar if income is stabilizing, she replied, “I would say there is a bit.”

“Many farm families are in significant financial stress right now,” said Roger Johnson, president of the National Farmers Union. “They are burning through equity; farm income has been cut in half over the past five years, and a majority of family farmers are currently earning negative farm income.”

Farm debt is rising at a faster rate than farm assets. The debt-to-asset ratio will rise to 13.4 percent this year, continuing an increase that began in 2012, said the USDA. Still, at 13.4 percent, the ratio would remain comparatively low. In 1985, during the agricultural recession of the mid-1980s — the hardest times that most farmers have experienced — the debt-to-asset ratio hit 22.2 percent.

Cash receipts from crops and livestock are forecast to be roughly the same this year as last, but production costs will rise by $12 billion, so income will be lower than in 2017. Net farm income of $65.7 billion this year would be the lowest since $57.4 billion in 2006, at the beginning of the commodity boom.

The USDA income forecast, which will be updated on Nov. 30, did not include the Trump tariff payments announced on Monday. The USDA said it would make cash payments of $4.7 billion to crop and livestock producers and spend an additional $1.2 billion on purchasing, and donating, excess food. A second round of payments to producers is possible in December if the trade war continues. “We do not know when those payments will be made or how big those payments will be,” USDA chief economist Rob Johansson told the USDA’s radio news service.

However, in its forecast, the USDA “embedded” the effect of retaliatory tariffs on farm revenue, said Litkowski. “You have a bit of play,” she said. Commodity prices may be lower, but the impact may be buffered by the size of the crop. The tariffs did not take effect until July, so half of this year’s marketings were in the books before the trade war flared.

“Soybean receipts in 2018 are expected to dip slightly ($39.1 million, or 0.1 percent) as an anticipated price decline more than offsets higher expected quantities sold,” said the USDA report. “Roughly half of the forecast value for 2018 soybean cash receipts is from 2017/2018 crop marketing year production that was sold prior to China raising import tariffs on U.S. soybeans by 25 percentage points. While prices for soybeans are expected to drop in calendar year 2018, overall soybean production quantities are expected to be up slightly in both the 2017/2018 and 2018/2019 crop marketing years.”

Exit mobile version