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Farm income projected to decline for fourth consecutive year

ERS releases February farm income forecast.

February 7, 2017

2 Min Read
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USDA's Economic Research Service says net farm income is forecast to decline by 8.7% to $62.3 billion in 2017, the fourth consecutive year of declines after reaching a record high in 2013. If realized, net farm income in 2017 will be the lowest since 2002, in inflation-adjusted terms.

Net cash farm income, on the other hand, is forecast to rise by $1.6 billion to $93.5 billion from the 2016 value, an increase of 1.8%.

The difference between the two profitability measures is expected to increase in 2017 largely due to an additional $8.2 billion in cash receipts from the sale of crop inventories.

The net cash farm income measure counts those sales as part of current-year income while the net farm income measure counted the value of those inventories as part of prior year income.

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Cash receipts
Overall, cash receipts are forecast to remain largely unchanged, with large offsetting changes in dairy receipts—up by $4.7 billion, or 13.7%, based on forecast higher prices—and cattle/calf receipts, which are forecast down by $4.5 billion (6.7%) based on anticipated lower prices. The forecast for crops is mostly unchanged, with wheat receipts changing most in absolute and percentage terms, falling $1.4 billion (16.6%) relative to 2016. Direct government payments are down by $0.5 billion (4.0%) to $12.5 billion.

Forecast
The 2017 forecast for average net cash income for farm businesses is up by 2.2%, with the largest increases for farms specializing in cotton (up 34%) and dairy (up 47%). These strong gains are offset by a forecast drop in net cash farm income for cattle/calf operations (down 12.9%).

Expenses
After declining for two consecutive years, the forecast for 2017 total production expenses is flat, with farm-origin expenses (including feed, livestock, and seed) down 2.6% as a group.

Manufactured input expenses were more mixed, with fertilizer group expenditures forecast down by 9.1% and fuel/oil expenses up by 13.1%. Labor costs are also forecast to rise 5.4% in 2017.

Asset values
Farm asset values are forecast to decline by 1.1% in 2017, and farm debt is forecast to increase by 5.2%. Farm sector equity, the net measure of assets and debt, is forecast down by $51.2 billion (2.1%) in 2017. The decline in assets reflects a 0.3% drop in the value of farm real estate, as well as declines in the remaining categories. The rise in farm debt is driven by higher real estate debt (up 7.3%). Financial liquidity measures, including working capital, are forecast to weaken in 2017, as are solvency measures such as the debt-to-asset ratio. The debt-to-asset measure is now above its average over the previous ten years.

Source: USDA ERS

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