Market News & Headlines >> Net Farm Income Seen Down 14%

The U.S. farm income picture looks considerably brighter than it did in February, thanks to high livestock prices. USDA on Tuesday forecast net U.S. farm income for 2014 at $113.2 billion, down $18.1 billion or about 14% from 2013’s estimated income of $131.3 billion, but up considerably from a February forecast of just $95.8 billion.

At the current forecast level, net farm income would be the lowest since 2014, but would still be $25 billion above the previous 10-year average, according to USDA’s Economic Research Service (ERS). ERS says lower cash receipts for crops and, to a lesser extent, higher production expenses and reduced government farm payments are behind the expected drop in net income.

ERS estimates crop receipts will decrease more than 7% this year, led by a projected $12.8-billion decline in corn receipts and a $6-billion decline in soybean receipts. The projected drop in corn receipts is up from a February forecast of $11 billion.

Livestock receipts, however, are now expected to increase by more than 15% largely due to higher prices, much more than the 0.7% increase forecast in February. Dairy receipts are seen up 21%, with hog receipts up 20% and cattle receipts up 15%.

The elimination of direct payments under the 2014 farm bill is projected to bring a 15% decline in government payments. Total production expenses are forecast to increase by $14.2 billion in 2014, extending the rise in expenses that has occurred over the past five years.

ERS sees the rate of growth in farm assets, debt, and equity slowing in 2014 compared to recent years due to expected lower net income, higher borrowing costs, and moderation in the growth of farmland values.

The value of farm assets is expected to rise 2.3% in 2014, while farm sector debt is expected to increase 2.7%. This represents a noticeable drop in the average annual growth in each of these measures compared with the last 10 years. “Nonetheless, the historically low levels of debt relative to assets and equity reaffirm the sector’s strong financial position,” ERS says.