U.S. farm income will tick upward this year, a sign of stability three years after the collapse of the commodity boom pushed income into a nosedive. Still, even with this year’s upturns, income will be a fraction of 2013’s peak, said the USDA a day after projecting little overall improvement in commodity prices in the year ahead, suggesting constraints on 2018 income.
The agency’s Economic Research Service estimated net cash farm income at $96.9 billion, up 4 percent from 2016, and net farm income at $63.2 billion, up 3 percent. Cash farm income is a measure of liquidity — the ability to pay bills — and net farm income, by including goods held in storage, is a measure of wealth. Producers have more control over the expenses and revenue that determine cash income. The USDA said that net cash farm income would be 71 percent and net farm income would be 51 percent of the records set in 2013.
Income is up from 2016 chiefly because producers sent a larger volume of crops and livestock to market than initially forecast, said USDA economists. Net cash farm income increased by $2.1 billion because growers sold crops this summer and fall as the new harvests came in.
“Cash receipts for broilers, hogs, and cattle/calves are expected to see strong growth in 2017 after posting significant declines in 2016,” said the USDA, which forecast an 8 percent increase in cash receipts from livestock and animal products. By contrast, crop receipts are expected to fall by 2 percent due to lower prices. In the end, cash receipts overall are estimated to rise by 2.4 percent.
In a blog posted ahead of the USDA report, Purdue economist Brent Gloy said, “While the 2017 picture appears somewhat better than 2016, cash receipts remain substantially down from the recent highs in every commodity group.” Livestock was faring better than crops, he said, adding that “the largest loser continues to be wheat, but corn’s struggles also are apparent.” Corn and wheat are two of the three most widely planted crops in the country.
While receipts rose, so did production costs, which were up 1.5 percent this year after two years of budget-cutting declines, said the USDA report. Farm payments, including crop subsidies and conservation supports, are forecast to be down by $1.8 billion this year, offset somewhat by a $1.2 billion increase in crop insurance indemnities.
Farmland, usually 80 percent of a farmer’s assets, is forecast to rise in value by 3.3 percent, or $81 billion this year, building overall farm equity by $70 billion, or 2.7 percent. The debt-to-asset ratio, an indicator of financial stress, was estimated at 12.7 percent, the same as in 2016 and a relatively favorable level.
During the agricultural recession of the mid-1980s, the hardest times in farm country since the Great Depression, the debt-to-asset ratio peaked at 22.2 percent and was about 20 percent for three years in a row, from 1984 to 1986.
The USDA is scheduled to make its first estimate of 2018 farm income in February.
To read the USDA’s farm income forecast, click here.