Net Farm Income Forecast Points to More Struggles Ahead

Posted on 03/09/2017 10:18 AM

NetNet cash farm income is likely to climb $1.6 billion in 2017 from the year prior to $93.5 billion, a gain of 1.8%, according to USDA's Economic Research Service (ERS). On the other hand, net farm income is expected to fall another 8.7% to $62.3 billion, the lowest level since 2002 in inflation-adjusted terms. This is the fourth year in a row that net farm income has declined.

ERS explains that, "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."

Overall cash receipts are expected to hold near steady with year-ago, with large gains in dairy receipts on higher prices expected to be offset by a similar decline in cattle/calf receipts on a drop in prices. Wheat receipts are expected to see the most change from 2016, with ERS forecasting a $1.4-billion (16.6%) decline. Direct government payments are expected to fall roughly 500 million (4.0%) in 2017 to $12.5 billion.

Production expenses in 2017 are likely to be steady with last year, after declining the two years prior, according to ERS. Farm origins expenses (including feed, livestock ad seed) are expected to dip 2.6%. "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," ERS continues.

While farm asset values are expected to decline 1.1% this year, farm debt is expected to climb 5.2%. This is expected to result in a 2.1% dip in farm sector equity to $51.2 billion in 2017. Financial liquidity and solvency measures are both expected to weaken in 2017. Of note, the debt-to-asset measure is now above its average over the previous 10 years.

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