Farmers and ranchers are pocketing billions of dollars less from sales of their crops and livestock while expenses continue to rise, the government said, forecasting a 26-percent drop in net cash farm income from its peak in 2013. The USDA estimated net cash income – a measure of solvency, or the ability to pay bills and make payments on debt – of $100.3 billion this year, down from $135.2 billion in 2013, when commodity prices were high and supplies were tight due to drought. Bumper crops have swollen U.S. grain inventories and driven down prices. With low commodity prices expected for the near term, farmland values are softening.
While the USDA’s forecast was not as dour as its estimate in February, net cash income this year would be the lowest since 2011. And the second year in a row of declining crop and livestock receipts underlines that the farm-sector boom that began nearly a decade ago is over.
Agriculture Secretary Tom Vilsack said the farm sector is fundamentally sound. In a statement, he said, “Despite the fact that farm income is forecast to be down from record levels, today’s projections provide a snapshot of a rural America that continues to remain stable and resilient in the face of the worst animal disease outbreak in our nation’s history and while the western United States remains gripped by drought.”
The debt-to-asset ratio, a gauge of the financial health of the sector, was forecast for 13 percent this year, low by historical standards but the highest since 13.6 percent in 2009 and a sharp step upward from 11.8 percent last year. Farm debt is rising this year while assets, particularly farmland and crops in storage, are losing value. The debt-to-asset ratio topped 20 percent for three years in a row during the agricultural recession of the 1980s.
Sales of large agricultural tractors and self-propelled combines this year are down sharply this year. The largest farm equipment maker, Deere and Co., forecasts a 25 percent decline this year in sales of agricultural and turf equipment.