Market News & Headlines >> USDA Lowers Farm Income Forecast Further
USDA’s Economic Research Service (ERS) on Tuesday revised its estimate of 2015 U.S. net farm income downward by another $2.4 billion to the lowest level in 13 years.
ERS now projects total net farm income for 2015 at $55.9 billion, down 38.2% from last year’s estimated $90.4 billion and down 55% from the record level of $123.3 billion reached in 2015. At the new projected level, 2015 net farm income would be the lowest since 2002 in both real and nominal terms.
Net cash farm income for 2015 is forecast at $93 billion, down about 28% from 2014. ERS noted the smaller change in net cash income relative to the broader net farm income measure is to be expected, as producers have more control over the timing of cash receipts and expenses and can thereby moderate large swings from year to year.
This year’s steep decline in net income has been primarily driven by lower crop and livestock receipts, while cash production expenses are projected to be down by 2.3%, ERS said.
Crop receipts are expected to decrease by $18.2 billion (8.7%) in 2015, primarily due to lower prices, led by projected declines of $8.6 billion in corn receipts, $5.7 billion in soybean receipts, and $2.7 billion in wheat receipts. Livestock receipts are forecast to decrease by $25.4 billion (12%). As with crop receipts, the primary driver is lower commodity prices, in this case for milk, hogs, broilers, and cattle/calves.
Government payments are projected to rise $1.0 billion or 10.4% to $10.8 billion in 2015. New commodity-based programs introduced as part of the 2014 farm bill and implemented for the first time this year—such as the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs—are now the largest source of government payments to the farm sector, ERS noted.
Farm asset values are forecast to decline by 2.8% compared to 2014, and farm debt is forecast to increase by 6.3%. The farm sector equity measure combines both of these, and is down by $104.2 billion or 4.0% compared to 2014. Farm real estate is the primary driver of the drop in asset values, with real estate value seen falling $36.9 billion (1.6%). The increase in debt is driven by increases in both real estate debt and non-real estate debt.
The primary driver of the drop in asset values is farm real estate, down $36.9 billion (1.6 percent). Debt is driven by increases in both real estate debt and non-real estate debt. However, ERS noted that while the movements in the balance sheet show an increasingly leveraged farm sector, risk measured at the sector level remains low.