US net farm income predicted to fall to lowest level in 15 years

Farm assets are set to increase to $2.7trn in 2018, buoyed by a rise in real estate values.

The US Department of Agriculture has released forecasts that suggest the amount of money ending up in farmers’ pockets this year will fall to levels not seen since the beginning of the millennium.

Net farm income, the broadest measure of profit, is set to decrease nearly 7 percent to $59.5 billion in 2018, which would be the lowest level in nominal terms in about 12 years. Net cash farm income is forecast to shrink 5.1 percent to $91.9 billion, a figure not seen since 2009.

The picture worsens when looking at the stats in inflation-adjusted terms, in particular for net farm income, which is predicted to fall to levels last witnessed in 2002.

Much of the fall owes to diminishing government payments: at 9.3 billion in 2018, they will be more than 18 percent lower this year than they were in 2017. This reflects large declines in agricultural risk coverage and price-loss coverage payments, according to the USDA.

Cash receipts for all commodities are also forecast to fall, but only by 0.5 percent. This masks varying fortunes among sectors: milk cash receipts are expected to fall 6.7 percent, whereas cattle and calf receipts are forecast up 3.3 percent. In both cases lower prices are acting as a drag on revenue, the USDA said. Corn cash receipts are predicted to decline by 4.0 percent, while soybean receipts are forecast up 4.5 percent.

Total production expenses are set to rise 1 percent in nominal terms, led by increases for fuel, interest and hired labor. Partially offsetting these is an expected drop in feed costs, according to the USDA. Farm sector debt will increase by about 1 percent, outpaced by equity, which will rise 1.6 percent on the back of higher property prices.