USDA today revised upward its projections of net farm and net cash farm incomes for 2017. USDA notes that after three consecutive years of decline, net cash farm income for 2017 is forecast at $100.4 billion, up $11.2 billion (12.6%) from 2016. Net farm income, a broader measure of profits, is forecast at $63.4 billion, up $1.9 billion (3.1) relative to 2016.
The stronger forecast growth in net cash income is largely due to an additional $9.7 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. Despite the forecast upturn in these profit measures relative to 2016, levels would be below all other years since 2010 (net farm income) and since 2011 (net cash farm income).
After declining for two consecutive years, total production expenses are forecast up $4.6 billion (1.3%, led by increases in expenditures on interest, hired labor, and fuels/oil, USDA notes. Partially offsetting these increases are expected drops in feed and fertilizer/lime expenses.
Farm asset values are forecast to increase by 4.0% in 2017 and farm debt is forecast to increase by 4.4%. Farm sector equity, the net measure of assets and debt, is forecast up by $101.8 billion (3.9%) in 2017. The increase in assets reflects a 4.6%- rise in the value of farm real estate. The rise in farm debt is driven by higher real estate debt (up 7.5%).
Solvency ratios are expected to be stable from 2016 to 2017, USDA says. Both farm sector debt and assets are predicted to increase relative to 2016. The farm sector debt-to-asset ratio and debt-to-equity ratios are expected to move slightly upward to 14.5%and the equity-to-asset ratio is expected to decline slightly to 12.7%.
Liquidity ratios have weakened over the past several years, USDA states. The 2017 forecast current ratio of 1.55 implies that $1.55 of current assets is available to pay for each dollar of current debt. Working capital is forecast at $63.8 billion. The current ratio averaged 2.26 and working capital has averaged $114.4 billion since 2009 and both have trended downward since 2012.