U.S. Farmers’ 2017 Profit Half of 2013 Levels, Report Says
A sharp drop in crop values will send U.S. net farm income for 2017 to the lowest levels seen since 2002 and nearly half of what it reached at its 2013 peak, according to the latest forecast by the Economic Research Service.
On Tuesday, the governmental agency released its latest forecast of net farm income, a conventional measure of farm sector profitability that is used as part of the U.S. gross domestic product calculation.
The report indicates that following several years of record highs, net farm income trended downward from 2013 to 2016.
For 2017, ERS forecasts that net farm income will fall to $62.3 billion ($54.8 billion in inflation-adjusted terms).
If realized, this would be an 8.7% decline from the prior year and a decline of 49.6% from the record high in 2013, according to the ERS report.
The expected decline in 2017 net farm income is driven by a forecast reduction in the value of production.
Crop value of production is forecast down $9.2 billion (4.9%), while the value of production of animal/animal products is forecast to decline by less than $1 billion (0.5%).
Net Cash vs. Net Farm Income
ERS’s report reflects a better picture for 2017 net cash income vs. net farm income, the difference in the two being when sales are put on the books.
A narrow cash-based measure, net cash farm income, is forecast to rise by $1.6 billion to $93.5 billion from the 2016 value, an increase of 1.8%. In contrast, net farm income is forecast to decline by 8.7% to $62.3 billion, the fourth consecutive year of declines after reaching a record high in 2013.
The difference between the two profitability measures is expected to increase in 2017 largely due to an additional $8.2 billion in cash receipts from the sale of crop inventories.
The net cash farm income measure counts those sales as part of current-year income; the net farm income measure counted the value of those inventories as part of prior-year income. If realized, net farm income in 2017 will be the lowest since 2002, in inflation-adjusted terms.
Overall, cash receipts are forecast to remain largely unchanged, with large offsetting changes in dairy receipts — up by $4.7 billion, or 13.7%, based on forecast higher prices — and cattle/calf receipts, which are forecast down by $4.5 billion (6.7%) based on anticipated lower prices. The forecast for crops is mostly unchanged, with wheat receipts changing most in absolute and percentage terms, falling $1.4 billion (16.6%) relative to 2016. Direct government payments are down by $0.5 billion (4.0%) to $12.5 billion.
Find additional information and analysis in ERS’s Farm Sector Income and Finances topic page, released February 7, 2017.