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2016 Net Farm Profitability to Dip for Third Year

Net cash farm income rises

For a third straight year, U.S. 2016 net farm income, a measurement of profitability, is forecast to decline.

In its November 2016 Farm Income Forecast Report released Wednesday, the USDA’s Economic Research Service, pegged net cash farm income for 2016 at $90.1 billion, down 14.6% from the 2015 estimate.

The report indicates that net farm income, a more comprehensive measure of profitability, is forecast to be $66.9 billion in 2016, down 17.2%. If realized, 2016 net farm income would be the lowest since 2009 in both real and nominal terms.

Overall, cash receipts are forecast to fall $23.4 billion (6.2%) in 2016 due to a $23.4-billion (12.3%) drop in animal/animal product receipts; crop receipts are forecast essentially unchanged from 2015, the ERS report showed.

Nearly all major animal specialties—including dairy, meat animals, and poultry/eggs—are forecast to have lower receipts, including a 14.8% drop ($11.6 billion) in cattle/calf receipts.

ERS indicated that a marginal expected gain in crop cash receipts is driven largely by a $5.3-billion increase in oil crop receipts, primarily soybeans, while feed crops (mainly corn) and vegetables/melons are down $2.2 billion (3.8%) and $1.4 billion (6.9%), respectively.

While overall cash receipts are expected to decline, receipts for several crop commodities are expected to increase by at least 10% above 2015 estimates, including cotton, up $0.9 billion (17.5%).

Likewise, while animal and animal product receipts are forecast overwhelmingly down in 2016, turkey (up $0.6 billion or 10.6%) and miscellaneous livestock (up $0.2 billion or 2.9%) receipts both grew. Direct government farm program payments are projected to rise $2.1 billion (19.1%) to $12.9 billion in 2016.

After sharp declines in 2015, average net cash farm income for most farm businesses specializing in crop production is expected to improve. Net cash farm income is forecast up for farm businesses specializing in mixed grains (up 10.4%), corn (up 15.1%), and soybeans and peanuts (up 11.8%).

For the second year in a row, production expenses are down. Total production expenses are forecast down $9.2 billion (2.6%) compared to 2015, led by declines in farm-origin inputs (feed, livestock/poultry, and seed) as well as fuel/oils.

Farm asset values are forecast to decline by 2.1% in 2016, and farm debt is forecast to increase by 5.2%. Farm sector equity, the net measure of assets and debt, is forecast down by $79.9 billion (3.1%) in 2016. The decline in assets reflects a 0.5% drop in the value of farm real estate, as well as declines in animal/animal product inventories, financial assets, and machinery/vehicles. The rise in farm debt is driven by higher real estate debt (up 8.6%).

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