USDA sees net farm income continuing to decline in 2017 even though farmers may generate more overall revenue.
In a precursor to the USDA Outlook Forum, USDA reported Tuesday that net farm income is projected to fall 8.7% in 2017 to $62.3 billion, the lowest net farm income totals since 2009. If realized, this would mark the fourth consecutive year of declining net farm income after peaking at a record high in 2013, USDA stated in its report.
The numbers look worse when adjusted for inflation. When inflation is factored in, USDA stated net farm income in 2017 will be the lowest since 2002.
Yet, “net cash farm income” for farmers is expected to increase $1.6 billion to $93.5 billion for 2017, a bump of 1.8%. The difference between “net farm income” and “net cash farm income” is mainly due to $8.2 billion more in cash receipts from the sale of old-crop inventory.
In a somewhat confusing explanation, USDA explains the difference is that the “net cash farm income measure counts those (old-crop) 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.”
Breaking down by sector, USDA states cash receipts for dairy should see a bump up of $4.7 billion, or 13.7% higher than 2016 based on higher dairy prices.
That dairy increase, however, will be offset by lower cattle-calf receipts, which will fall by $4.5 billion, or 6.7% for the cattle sector.
The forecast for crops is largely unchanged. Wheat sees the biggest impact in absolute terms with a $1.4 billion decline in revenue, or 16.6% compared to 2016.
Direct government payments to farmers will be down about $500 million, or roughly 4%, to $12.5 billion.
Total production expenses are expected to remain flat after two consecutive years of slight declines. Feed, livestock and seed expenses are projected to decline 2.6% overall. Fertilizer expenses are expected to fall 9.1% but fuel-oil expenses are going to rise by a projected 13.1%. Labor costs are also expected to increase 5.4% this year as well.
Other Financial Indicators
Farm assets are also forecast to dip by 1.1% this year and farm debt is projected to increase 5.2%.
The key to the decline in farm assets is a 0.3% dip overall in the value of farm real estate as well as declines in other equipment assets. Debt on real estate also is projected to rise 7.3% for farmers as well.
Farm equity is projected to fall $51.2 billion this year, a drop of 2.1%.
USDA noted the overall weakening condition for farmers when it comes to cash flow and working capital. “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 10 years.”
Though stressing that net farm income will fall 8.7% this year, the median income of a farm household is expected to rebound slightly to $79,733 in 2017. The median farm household income had hit $81,637 in 2014 before backsliding the last two years. The main reason for higher overall median farm income is a bump in the increase in off-farm income. Median off-farm income is expected to increase 6.7% over the next two years.
More details can be found at https://www.ers.usda.gov/…
Chris Clayton can be reached at Chris.Clayton@dtn.com
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