Outlook for U.S. Farm Income: Stable but ‘at Much Lower Levels’
After a three-year plunge, U.S. farm income is stabilizing “at much lower levels than in previous years,” said the Kansas City Federal Reserve Bank, warning that “growing inventories and trade uncertainty remain the key risks to the outlook.” In its periodic Ag Outlook report, the regional Fed said 2017 income was 18% below the long-term average.
“Longer-term projections for farm income were also expected to stabilize but at levels below the long-run average from 1970-2017,” wrote KC Fed economist Cortney Cowley. “Continued oversupply of agricultural products, especially crops, is a significant risk and would likely keep prices from rising to more profitable levels. International trade could help support agricultural prices and incomes, but uncertainty over trade deals has generated additional risk for the agricultural sector.”
Some 40% of the total value of U.S. crop production is exported, an increase from 29% in 2013, said the KC Fed. “Uncertainty surrounding NAFTA and other trade deals is a key risk to the agricultural outlook.”
The U.S. often is described as the world’s largest agricultural exporter, although its share of the world market is shrinking. In the late 1970s, the U.S. share of the corn, soybean, and wheat market was 65%. In 2017, it was 28%. “The decline in the U.S. share of world crop exports suggests that the rest of the world has become more active in global markets when the U.S. has become increasingly reliant on world trade,” said the Ag Outlook.