U.S. farm income will fall for the third year in a row, said the Agriculture Department, but the impact is not expected to be as severe as feared at the start of the year. In a tri-annual forecast, the USDA estimated net farm income — the net value of production — at $71.5 billion, much better than the $54.8 billion that it estimated in February although far below the record $123.8 billion of 2013 as the seven-year agricultural boom collapsed under the weight of large crops worldwide.
The USDA also revised upward by more than $24 billion its estimate of net farm income in 2015, brightening its picture of ag-sector finances. Agriculture Secretary Tom Vilsack credited “the unique ability of American farmers and ranchers to plan ahead and make sharp business decisions in a challenging market” for the stronger outlook.
Production expenses are being cut by $10 billion this year, the second year in a row of lower spending, and the major reason for the higher income estimate. “Reduced input costs are expected to ease, but not eliminate, some of the pressure from lower cash receipts,” said USDA economists.
Overall, the USDA report indicated a softer, albeit still bumpy, landing for the farm sector as income falls steeply from boom-driven highs. Net farm income this year would be 42-percent lower than in 2013, compared to the initial forecast of a 56-percent plunge over three years. The department will update its forecast on Nov. 30.
The sharp contraction in farm income coupled with forecasts of comparatively low commodity prices for years to come has prompted calls for a stronger farm safety net. Congress is expected to begin the groundwork next year for writing the 2018 farm subsidy law. Farm bills are panoramic legislation that cover crop subsidies, land stewardship, farm exports, ag research, food stamps, international food aid and crop insurance.
Farm subsidies are forecast for $13.5 billion this year, up by $2.7 billion from 2015. Nearly half of the money would flow through the insurance-like Agricultural Risk Coverage subsidy, triggered when crop revenue is markedly below average. Cash receipts from crops and livestock are forecast to fall by nearly 7 percent this year. “The decline reflects falling commodity prices, an effect only partially offset by an increase in production,” said USDA’s Economic Research Service
The value of farm land and buildings is expected to decline by a modest 1.5 percent, following a 0.5-percent dip in 2015. Real estate accounts for more than 80 percent of farm assets, so land values are closely watched.
A common measure of farm sector health, the debt-to-asset ratio, was forecast for 12.4 percent this year, nearly unchanged from 2015 and up one point since 2013. Still, the ratio is at an historically low level, said USDA.
Vilsack said the past five years recorded the highest average farm income ever, despite the slump that followed 2013. The USDA has forecast an upturn in farm exports in fiscal 2017, which begins Oct. 1. It will forecast farm income for 2017 in February.