Net farm income, a broad measure of profits, is forecast to decrease $4.3 billion (6.7 percent) from 2017 to $59.5 billion in 2018, the lowest net farm income level in nominal dollar terms since 2006, according to the February 2018 Farm Income Forecast of the U.S. Department of Agriculture’s Economic Research Service.
Net cash farm income is forecast to decrease $5 billion (5.1 percent) to $91.9 billion, the lowest level since 2009. In inflation-adjusted 2018 dollars, net farm income is forecast to decline $5.4 billion (8.3 percent) from 2017 and, if realized, would be the lowest real-dollar level since 2002. Real net cash farm income is forecast to decline $6.7 billion (6.8 percent) from 2017, which would be the lowest real-dollar level since 2009.
Net cash farm income includes cash receipts from farming as well as farm-related income, including government payments, minus cash expenses. Net farm income is a more comprehensive measure that incorporates noncash items, including changes in inventories, economic depreciation and gross imputed rental income, the report said.
Cash receipts for all commodities are forecast to fall (in nominal dollars) $2 billion (0.5 percent) in 2018 to $363.1 billion. Relatively small annual declines are predicted for both animal/animal product (0.3 percent) and crop (0.8 percent) receipts. Forecast declines in receipts for milk, poultry and eggs are expected to more than offset a forecast increase in meat animal receipts.
A forecast $1.7-billion (4.5 percent) increase in soybean receipts will be more than offset by expected declines in receipts for wheat, corn, cotton, fruits and nuts, as well as vegetables and melons. Direct government farm payments are forecast to decline $2.1 billion (18.6 percent) to $9.3 billion in 2018, reflecting large declines in Agricultural Risk Coverage and Price Loss Coverage payments, the report said.
Total production expenses (including operator dwellings) are forecast up $3.5 billion (1 percent) in nominal terms to $359.2 billion in 2018, led by increases for fuels/oil, interest and hired labor. Partially offsetting these increases are an expected drop in feed expenses.
The 2018 forecast for farm business average net cash farm income is $93,200, the fourth consecutive decline since 2014 and the lowest average since 2011, in nominal dollars. A 6.2-percent ($2,100) increase is expected for cattle and calf farm businesses. Average net cash farm income for hog, poultry and dairy farm businesses—along with all crop farm business categories—is forecast to decline in 2018, with wheat and dairy farms expected to see double-digit (percentage) declines.
Farm sector equity (nominal) is forecast up by $43.7 billion (1.6 percent) to $2.7 trillion in 2018. Farm assets are forecast to increase by $47.5 billion (1.6 percent) to $3.1 trillion in 2018, reflecting an anticipated 2.1-percent rise in farm sector real estate value. Farm debt is forecast to increase by $3.8 billion (1 percent) to $388.9 billion, led by an expected 1.2-percent rise in real estate debt.
In an affiliated report, ERS said the median income of farm operator households is expected to be relatively unchanged in 2017 and 2018.
Farm households typically receive income from both farm and off-farm sources. The total median income of U.S. farm households increased steadily over 2010-14, reaching an estimated $81,637 in 2014 in nominal terms. Median household income, which fell 6 percent in 2015 and remained flat in 2016, is forecast to rise 3.5 percent from its 2016 level by 2018 to $78,886 (but decrease 0.8 percent in inflation-adjusted terms).
Median farm income earned by farm households was estimated at negative $940 in 2016 and is forecast to decline to negative $1,316 in 2018. In recent years, slightly more than half of farm households have had negative farm income each year. Most of these households earn positive off-farm income—and median off-farm income is forecast to increase 2.3 percent from $66,468 in 2016 to $68,011 in 2017, and another 2.8 percent in 2018 to $69,940. Because farm and off-farm income are not distributed identically for every farm, median total income will generally not equal the sum of median off-farm and median farm income.
National Farmers Union President Roger Johnson said in a statement in reaction to the reports that the projections elevate the need for an increase in funding for farm programs:
“The farm economy has been on a sharp decline for five years and projections do not indicate we’ll get much relief any time soon. In fact, this latest release from ERS indicates a majority of farmers have had negative farm income in recent years. Family farmers and ranchers have no control over this fate and during times as tough as these they need a strong safety net to help keep them on the farm.
“Congress must increase spending on farm programs that have not provided adequate relief to this point and they must do so soon. We need a strong farm bill in 2018.”
In a statement, Growth Energy CEO Emily Skor said the report underscores the need for a strong Renewable Fuel Standard.
“Rural communities are falling further behind and many farmers are wondering if this next harvest will be their last,” Skor said. “The latest figures show farm income hitting a 12-year low, with debt mounting in the face of a global crop surplus. The RFS remains the single most promising tool available to revitalize rural growth and provide a key outlet for the multi-year crop surplus. To make that happen, it’s vital that policymakers reject attempts by a handful of refineries to pull the rug out from under America’s farmers by limiting the growth of biofuels.
“Voters trusted this administration with the power to launch a new wave of growth across rural America and now is the time to deliver on that promise. We cannot leave rural economies in the U.S. to decline or stagnate as they did during the 1980s. We’re grateful to President Trump for his long-standing commitment to the RFS and urge him to stand strong against misguided attempts to undermine rural growth.”
Larry Dreiling can be reached at 785-628-1117 or [email protected].
