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USDA says farm sector profitability to fall in 2015

The USDA’s Economic Research Services is predicting farm profitability will fall by 32% on 2014, although farm wealth will stay at record levels.

Farm sector profitability is expected to weaken in 2015, according to data released by the US Department of Agriculture (USDA) Economic Research Services in February. National net farm income is forecast at $73.6 billion this year, 32 percent down from 2014’s forecast of $108 billion and the lowest figure since 2009. Net cash income is projected to be $89.4 billion, 22 percent below the 2014 forecast.

Plunging commodity prices during the second half of 2014 pushed cash receipts down despite a bumper harvest for corn and soybean farmers during the year. And commodity crops aren’t the only agricultural products with downward pressure – livestock receipts are expected to decrease by nearly 5 percent this year due to a 22.3 percent drop in dairy and 13.8 percent decrease in hog receipts.

“Beef production and beef/veal exports are expected to decline while pork production and exports are expected to increase. Milk production and marketing are expected to increase in 2015 while milk exports are expected to decline,” said the report.

The good news is that the $2.5 billion projected increase in production expenses in 2015 will be the lowest since 2009. According to the USDA, production expenses forecast for 2015 will be the highest on record nominally but lower than 2014 when adjusted for inflation.  The largest projected expenses increase is in livestock and poultry purchases. Other significant increases include $1.4 billion in total labour expenses, $1.3 billion in miscellaneous expenses including animal health/breeding expenses, contract production fees and irrigation water and $1.1 billion in total interest expenses. Anticipated declines include $4.5 billion in fuel and oil expenses, a $1.6 billion drop in feed expenses and $1.1 billion in fertiliser.

Government payments are also projected to rise by 15 percent to $12.4 billion, partly offsetting the $25.8 billion decline in crop and livestock receipts.

Although the farm income outlook in 2015 does not look great, farm wealth is projected to stay at record levels and farm asset values are expected to increase by 0.4 percent in 2015 to over $3 trillion.

Read the full report: http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/2015-farm-sector-income-forecast.aspx

Source: USDA, Economic Research Services, Farm Income and Wealth Statistics.

Source: USDA, Economic Research Services, Farm Income and Wealth Statistics.