Dips in U.S. Farm Sector Profitability Expected Into 2016
1 September 2016 U.S. farm sector profitability is forecast to decline for the third straight year. Net cash farm income for 2016 is forecast at $94.1 billion, down 13.3 percent from the 2015 estimate. Net farm income is forecast to be $71.5 billion in 2016, down 11.5 percent. If realized, 2016 net farm income would be the lowest since 2009.
Cash receipts are forecast to fall $25.7 billion (6.8 percent) in 2016, led by an $18.7-billion (9.8 percent) drop in animal/animal product receipts and a $7.1-billion (3.7 percent) decline in crop receipts. Nearly all major animal specialties — including dairy, meat animals, and poultry/eggs — are forecast to have lower receipts, as are feed crops and vegetables/melons, down $3.2 billion (5.5 percent) and $1.5 billion (7.5 percent), respectively. While overall cash receipts are declining, receipts for several commodities are expected to increase by at least 1 percent above 2015 estimates, including cotton, up $0.6 billion (12.5 percent). Direct government farm program payments are projected to rise $2.7 billion (24.8 percent) to $13.5 billion in 2016, in part due to the expected price environment.
For the second year in a row production expenses are down. Total production expenses are forecast down $10.1 billion (2.8 percent) over 2015, led by declines in farm-origin inputs (feed, livestock/poultry, seed) and fuel/oils.
Farm asset values are forecast to decline by 2.2 percent in 2016, and farm debt is forecast to decrease by 0.8 percent. Farm sector equity, the net measure of assets and debt, is forecast down by $61.2 billion (2.4 percent) in 2016. The decline in assets reflects a 1.5-percent drop in the value of farm real estate, as well as declines in animal/animal product inventories, financial assets, and machinery/vehicles. The decline in farm debt is driven by lower nonreal estate debt (down 4.6 percent), reflecting a change in farmers’ management decisions (such as reducing input expenditures) but also an increase in short-term commercial bank loan rates, which make debt more expensive.
Get the 2016 forecast for farm sector income.
Statement from Agriculture Secretary Tom Vilsack
In response to the farm income forecast, Agriculture Secretary Tom Vilsack said:
“Today’s farm income forecast underscores the unique ability of American farmers and ranchers to plan ahead and make sharp business decisions in a challenging market, as net farm income for 2015 was revised up significantly to $80.7 billion-an increase of 43 percent since the February forecast. Falling production expenses, including the price of fuel and inputs, was the largest contributor to this latest rally by farmers. Just last week, farm exports for 2016 were revised up to one of the highest levels on record, demonstrating that U.S. farmers and ranchers continue to beat expectations. Overall, farm income over the last five-year period reflects the highest average five-year period on record. Although net farm income for 2016 is forecast to decline relative to 2015, the 2014 Farm Bill has provided for a comprehensive farm safety net that will ensure financial stability for America’s farming families. Farm Bill program payments-including Agriculture Risk Coverage (ARC), Price Loss Coverage (PLC), and the Margin Protection Program for Dairy (MPP)-are forecast to increase nearly 25 percent to $13.5 billion in 2016. For producers challenged by weather, disease and falling prices, we will continue to ensure the availability of a strong safety net to keep them farming or ranching.
“The estimates today also showed 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. In addition to strong balance sheets, median household income for farming families remains near historic highs. In 2016, higher off-farm earnings are expected to help stabilize losses due to low commodity prices.
“The trend in strong household income reflects work of the Obama Administration since 2009 to make significant and targeted investments across the United States toward 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 bio-based economy in rural communities that today supports more than 4 million American jobs. At the same time, rural communities have been infused with billions of dollars to build schools, hospitals, and public safety headquarters, and businesses of all sizes have availed themselves of USDA’s business loans and grants to spur growth that complements the agricultural economy. Other key investments made by USDA since 2009 include new or improved high-speed internet service to 6 million Americans in rural areas, along with investments in electricity, water and wastewater, and clean power, that will continue to strengthen rural communities for generations to come.
“Outside the United States, demand for American-grown food and agricultural products remains strong. Agricultural exports have surpassed $1 trillion since 2009, besting all previous records in terms of value and volume and acting as an engine for America’s farm economy. USDA will continue to ensure American farming families have open markets and a level playing field by working to remove unfair barriers to trade and negotiating trade agreements, such as the Trans Pacific Partnership, that benefit all of agriculture.”
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