ERS: Farm income down again in 2016; crop farmers do better
Net farm income declined in 2015 and is forecast to decline again in 2016, but crop producers are expected to do better, the Agriculture Department’s Economic Research Service said in a report released Wednesday.
Farm sector profitability is forecast to decline for the third straight year and cash farm income for 2016 is forecast at $90.1 billion, down 14.6 percent from the 2015 estimate, ERS said.
Net farm income, a more comprehensive measure of profitability, is forecast to be $66.9 billion in 2016, down 17.2 percent. If realized, 2016 net farm income would be the lowest since 2009 in both real and nominal terms.
Overall, cash receipts are forecast to fall $23.4 billion (6.2 percent) in 2016 due to a $23.4-billion (12.3 percent) drop in animal/animal product receipts; crop receipts are forecast essentially unchanged from 2015.
Nearly all major animal specialties — including dairy, meat animals and poultry/eggs — are forecast to have lower receipts, including a 14.8-percent drop ($11.6 billion) in cattle and calf receipts.
But after sharp declines in 2015, average net cash farm income for most farm businesses specializing in crop production is expected to improve. Net cash farm income is forecast up for farm businesses specializing in mixed grains (up 10.4 percent), corn (up 15.1 percent), and soybeans and peanuts (up 11.8 percent).
Farm asset values are forecast to decline by 2.1 percent in 2016, and farm debt is forecast to increase by 5.2 percent.
Farm sector equity, the net measure of assets and debt, is forecast down by $79.9 billion (3.1 percent) in 2016. The decline in assets reflects a 0.5-percent drop in the value of farm real estate, as well as declines in animal and animal product inventories, financial assets, and machinery and vehicles.
The rise in farm debt is driven by higher real estate debt (up 8.6 percent).
Farm income highest average over 5 years on record
Agriculture Secretary Tom Vilsack tried to put the best face possible on the report. Farm income over the last five-year period reflects the highest average five-year period on record, while the safety net provided by the 2014 farm bill will continue to provide stability, Vilsack noted.
Farm bill program payments are forecast to increase over 19 percent to $12.9 billion in 2016, primarily through Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) payments, he said.
“As we saw in the August forecast, the estimates again show that debt to asset and debt to equity ratios — two key indicators of the farm economy’s health —continue to be near all-time lows, and more than 90 percent of farm businesses are not highly leveraged,” Vilsack said.
“Median household income for farming families remains near historic highs and is expected to remain stable relative to 2015. In 2016, higher off-farm earnings are expected to help stabilize losses due to low commodity prices,” Vilsack said.
“At the beginning of the Obama administration, rural areas were reeling from the Great Recession. Rural counties were losing 200,000 jobs per year, rural unemployment reached nearly 10 percent, and poverty rates reached heights unseen in decades.
“Over the past eight years, USDA has invested in building a more robust system of production agriculture, expanding foreign markets for U.S. farm goods, bolstering local and regional food systems across the country, and creating a new biobased economy in rural communities that today supports more than 4.2 million American jobs.
“Rural counties added over 250,000 jobs in both 2014 and 2015, and the rural unemployment rate has dropped below 6 percent for the first time since 2007. Rural populations have stabilized and are beginning to grow. Median household income in rural areas increased by 3.4 percent in 2015, poverty rates have fallen, and child food insecurity is at an all-time low.”
–The Hagstrom Report