With farm income down sharply since 2013, “farmers are going through a trying time,” said Zippy Duvall, the newly elected president of the American Farm Bureau Federation, the largest U.S. farm group. “It is a very difficult time with commodity prices as low as they are.”
Duvall cited the financial pressures as a reason for Congress to approve the Trans-Pacific Partnership trade pact. An AFBF analysis estimated TPP would boost ag exports by 4 percent a year and result in a $4.4 billion increase in net farm income.
“No question, we need to be very concerned about commodity prices,” said Agriculture Secretary Tom Vilsack, who took part in a teleconference with Duvall to promote TPP. “We obviously are very sensitive” to commodity price levels, but interest rates are low and indicators of financial stress such as the farm debt-to-asset ratio remains low although it has crept upward.”
House Agriculture chairman Michael Conaway pointed to “deteriorating conditions in farm country” in announcing that Vilsack would testify today at a hearing on the rural economy. “This hearing will examine the extent to which current farm policy is helping address the estimated 56 percent decline in net farm income since 2013, the largest 3-year percentage drop since the Great Depression,” Conaway said last week.
Net farm income is a USDA calculation of the net value of production accruing to farmers in a calendar year, whether goods are sold or held in storage. It is a measure of wealth. The other widely used USDA gauge is net cash farm income, based on cash transactions during a year. It is a measure of solvency, or the ability to pay bills and retire debt. Net cash farm income generally is less variable than net farm income, says USDA.
By either measure, farm income set a record in 2013, when corn, soybean and wheat prices were high and supplies were tight following the 2012 drought. Back to back bumper crops brought down market prices and 2013 now is seen as the last year of an agricultural boom that began in 2006. Large supplies and stagnant commodity prices are expected for years to come.
The USDA forecasts farm income to stabilize this year, dropping 2-3 percent, compared to the plunges seen in 2014 and 2015. Net cash farm income would be down 33 percent and net farm income would be down 56 percent from 2013. Net farm income would be the lowest since 2002, according to the 2016 Farm Sector Income forecast.