US Farm Income Forecast Suggests More Hard Times Ahead

US - The US Department of Agriculture's Economic Research Service (USDA-ERS) has predicted a decline in net cash and net farm income for the third consecutive year, in its 2016 Farm Sector Income Forecast.
calendar icon 11 February 2016
clock icon 4 minute read

Net cash farm income is forecast at $90.9 billion, down about 2.5 per cent from the 2015 forecast levels. Net farm income is forecast to be $54.8 billion in 2016, down 3 per cent.

If realised, 2016 net farm income would be the lowest since 2002 (in both real and nominal terms) and a drop of 56 per cent from its recent high of $123.3 billion in 2013.

Nearly all major animal specialities - including dairy, meat animals, and poultry/eggs - are forecast to have lower receipts, as are vegetables/melons and feed crops. 

Milk receipts are expected to drop another 6.4 per cent in 2016 as declining prices continue to outweigh an expected increase in milk production. Cash receipts from cattle production are also expected to decline for a second consecutive year in 2016, falling 3.9 per cent as cattle/calf prices are expected to decline further.

Hog production is expected to continue rising in 2016 as the industry recovers from the porcine epidemic virus (PEDV) in 2014. However, hog prices are expected to drop again in 2016 following a sharp decline in 2015, leading to a 5.1 per cent drop in 2016 hog cash receipts.

Poultry and egg cash receipts are expected to fall 4.1 per cent in 2016, due primarily to a decline in egg receipts. The increase in broiler production - coupled with avian flu-related import bans on US poultry by some nations - has increased US supply and led broiler prices sharply lower in 2015. Broiler prices are expected to continue declining in 2016 as production increases, leading to a modest decline in broiler cash receipts.

Feed crop cash receipts are also expected to fall, providing some comfort for animal producers in the form of lower production costs. Other inputs like fertilisers and fuels are also expected to decline in price, but the cost of labour will increase.

While overall cash receipts are expected to decline, receipts for several commodities - including turkeys, cotton, rice, sorghum, oil crops, dry beans, potatoes, and sugarcane/sugar beets are forecast to rise by at least 1 per cent in 2016.

Direct government farm program payments are projected to rise $3.3 billion (31.4 per cent) to $13.9 billion in 2016 in response to the expected price environment.

Meanwhile, the median income of farm households increased steadily over 2010-14, peaking at an estimated $80,620 in 2014. After a slight dip in 2015, median household income is forecast to rebound in 2016 to an expected $81,666. The report found that many farm households earned most of this income from off-farm sources.

Agriculture Secretary Tom Vilsack focussed on the positive aspects of the forecast.

"Today's farm income forecast anticipates continued growth in median farm household income to a record level of $81,666 in 2016, up 4.5 per cent," he said.

"This trend reflects the investments made by USDA and the work of the Obama Administration to protect and ensure a strong farm safety net. Since 2009, USDA has made significant and targeted investments of more than $850 million across the United States toward building a robust local and regional food system that has the infrastructure to support a more diverse agricultural economy. 

"Overall, net farm income for all producers is forecast down slightly, 3 per cent, relative to 2015.

"This is an improvement from the double digit declines seen in 2014 and 2015, and it reflects a more competitive trade environment, softening projection for global demand and a continuation of the dip in agricultural commodity prices.

"While agricultural exports climbed more than 45 per cent in value, totaling $911.4 billion over the past 5 years and besting all previous records in terms of value and volume and acting as an engine for America's farm economy, today's forecast shows how weaker foreign demand can weigh on farm income.

"Nevertheless, today's forecast indicates a farm economy that has absorbed a challenge and will begin to see greater opportunities for growth in the months ahead.

"USDA and the Office of the US Trade Representative (USTR) will continue to ensure American farming families have open markets and a level playing field by working to remove unfair barriers to trade and negotiating trade agreements, such as the Trans Pacific Partnership, that benefit all of agriculture."

Further Reading

You can view the full income forecast report by clicking here.

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