Market News & Headlines >> USDA Lowers Farm Income Forecast
USDA on Tuesday significantly lowered its forecast for 2014 net U.S. farm income to $96.9 billion, 21.1% below last year and the lowest level in four years.
The new USDA forecast represents a decline of $16.3 billion or 14.4% from its previous 2014 forecast of $113.2 billion made in August and is $25.9 billion below the revised net income estimate for 2013. USDA revised 2013 net farm income downward by $8.5 billion or 6.5%. Farmers’ net cash income for 2014 is forecast at $108.2 billion, down more than 19% from 2013. Net cash income is projected to decline less than net farm income primarily because it reflects the sale of carryover stocks from 2013.
The data from USDA’s Economic Research Service shows that lower crop receipts for 2014 will be largely offset by higher livestock receipts, leaving higher production expenses as the main driver of the decline in net income. ERS now sees 2014 cash receipts for crops falling $27.2 billion or 12.3% from last year, while livestock cash receipts are seen rising by $25.7 billion or 14.0%, due largely to anticipated record cattle and milk prices.
Total gross farm income is expected to drop just $6 billion from 2013 to $467.3 billion, but total operating expenses are seen rising $19.8 billion or 5.7% to a record $370 billion.
ERS noted in a news release that the elimination of direct payments under the Agricultural Act of 2014 results in only a projected 4% decline in government payments due to offsetting supplemental and ad hoc disaster assistance payments related to drought.
ERS forecast that the rate of growth in farm assets will diminish in 2014 compared to recent years as a result of lower net income leading to less capital investment and because of moderation in the growth of farmland values.
Farm sector debt is expected to rise 3.1%, and is seen increasing more than assets for the first time since 2009. Most of the anticipated increase in debt is for non-real estate loans, with lower income boosting demand for operating funds. Despite the anticipated higher debt, debt-to-asset ratios remain historically low.