USDA trims '09 farm income outlook
In general, farming was a fairly lucrative business in 2008. That's going to change this year, according to a recent USDA report. But, the drop still puts overall farm income higher than just a couple of years ago.
In its Farm Income and Costs: 2009 Farm Sector Income Forecast released last week, USDA pegs nationwide 2009 net farm income at $71.2 billion, 20% lower than the estimated 2008 figure of $89.3 billion. Net cash income is seen at $77.3 billion -- that's also down from last year, off 17% from $93.4 billion. Net cash income typically lags net farm income slightly because carryover grain stocks are taken into account on the former figure, while "net farm income reflects only the earnings from production that occurred in the current year," according to the USDA report.
While off from last year -- a year where record income levels were reached on farms in some parts of the country -- farm income projections for 2009 remain above the trend line. "$71.2 billion would be 9% above the average of $65 billion earned in the previous 10 years," according to USDA. "Net cash income...[is] still 7.6% above its 10-year average of $71.8 billion.
"The record net farm income in 2008 was driven by a large increase in the value of crop production that was only partially offset by rising costs of production for the farm sector. Prices of major crops (corn, soybeans, wheat) trended upward in late 2007 and continued doing so in the first part of 2008 as the remainder of the 2007 harvest was marketed," the report continues. "These prices declined in the latter months as the 2008 harvests occurred, but remained high by historic standards. Exports were strong as a weak dollar relative to other currencies made U.S. commodities more competitive in international markets, and ending-year stocks of many commodities were low. Commodity prices trended downward late in 2008 as the national and world economies softened."
There's a bright spot in the lowered income outlook: Farm expenses are following the same downward path. But, while expected lower than '07 and '08, expenses will still likely shake out at or above trend.
"Total expenses are forecast to decline for the first time since 2002," according to the report. "The 2007 and 2008 increases in farm expenses, at $20.5 billion and $36.2 billion respectively, were the largest year-over-year absolute changes on record. The $13.5-billion decline in expenses projected for 2009 would still leave farm expenses 9% higher than in 2007."
A big takeaway from last week's projection of farm incomes by USDA is that farmers in the U.S. are now part of a system that stretches far beyond their farms' borders. That's evident in the growing influence of exports and how much U.S. farm incomes depend on global demand for what's raised here. 2008 was an example of how much that influence has grown, according to Friday's report.
"In 2008, the farm sector was whipsawed by highly volatile domestic and international macroeconomic forces. Prices of both farm commodities and farm production inputs spiked in the first half of the year and then plunged in the latter half," according to the report. "The U.S. farm sector is perhaps more intertwined with the world economy than ever. Demand arising from both the growing populations and rising incomes in other countries has expanded markets for farm commodities and increased competition for critical production inputs such as fuel, feed and fertilizer."