U.S. farm income will drop to its lowest level in six years under the weight of sharply lower crop prices and a plunge in milk prices, according to a forecast from the Agriculture Department. Net farm income, which reflects earnings from production in the current calendar year, would fall by 32 percent from 2014 levels. The USDA said another measure of the farm sector, net cash farm income, would slump by 22 percent, a smaller decline because it includes revenue from stocks carried over from last year.
“The largest forecast decline is for corn receipts, which have fallen 38 percent since 2012,” said the USDA’s Farm Sector Income Forecast. “Large declines in receipts are also expected for fruit/tree nuts, oil crops, and wheat. The value of U.S. livestock production is forecast to decline in 2015…Cattle/calf receipts are expected to grow significantly while hog and milk receipts decline.”
The USDA forecast “a modest decline in farmland values.” Real estate is the largest asset held by farmers, the agency noted in projecting that 2015 will see “a 0.8-percent decline in the value of farm real estate.” With lower income and high production costs, farm sector debt will rise somewhat. “As a result of farm assets growing slower than debt, the sector’s debt-to-asset and debt-to-equity ratios are forecast to rise to 10.9 and 12.2 percent, respectively. Even though these measures of sector leverage have increased, each remains low relative to historical levels,” said the USDA.