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U.S. Farm Incomes Continue to Dive
The latest U.S. Farm Income Forecast from the USDA projects that 2014-15 farm net incomes will see a severe decrease nearing the low income levels of 1983.
In its November farm income update Tuesday, the USDA forecasts 2014-15 net farm income (which includes household expenses) will decline 38.2% with net cash income down a staggering 27.7%. Corn net cash income this year will average $143,000 per farm, down from $197,200 last year, and $255,300 in 2013.
“It’s not just a crop story now; it’s broader than that,” said Jeff Hopkins, chief of the farm economy branch of the USDA Economic Research Service. “The decline in income is really due to a broad decline in all commodity prices.”
Cash receipts for crops are predicted to fall 8.7% with livestock receipts forecast at down 12%. Government payments are projected to rise by 10.4%, which is a big change from falling 11.2% from 2013 to 2014. It’s interesting to note that most corn and soybean farms in the Midwest are enrolled in the Agriculture Risk Coverage (ARC) program instead of Price Loss Coverage (PLC). As of now, that decision looks to be a smart one as ARC payments are projected to be $4.2 billion in 2015, while PLC payments are forecast to total $741 million.
Every farm asset listed in the report is forecast to see a decrease in value. Those assets include real estate, livestock and poultry, machinery and motor vehicles, crops stored, purchased inputs, and financial assets. Financial assets are predicted to see a 22.4% decrease, and crops stored are forecast to lose 22%. Real estate is projected to fall 1.6% in value.
“We are saying that this is price-driven, which is good in terms of fundamental problems — prices will cycle back,” said Hopkins. “We’re hoping for price support from overseas markets and from domestic demand, as well.”
Not everyone is convinced that commodity price changes will happen swiftly.
“This is the new normal for now,” said Jeff Dema, president of Grower Services at FarmLink. “It’s important that we respond to that and don’t think it’s going to return to the days of yesterday.”
Farm equity is forecast to fall 4% to $2.494.5 billion. However, cash expenses are predicted to see a 2.3% decrease, leaving total expenses down an estimated 2%.
“Farmers are reacting to a down market, so they’re obviously going into conservation mode,” said Dema. “I would encourage them to not necessarily go into conservation mode, but to get into optimization mode instead. Focus on return on investment and putting dollars into areas that provide a strong return."