USDA expects dips in farm sector to continue

Farm sector profitability is forecast to decline for the third straight year. Net cash farm income for 2016 is forecast at $94.1 billion, down 13.3 percent from the 2015 estimate. Net farm income is forecast to be $71.5 billion in 2016, down 11.5 percent. If realized, 2016 net farm income would be the lowest since 2009.

Cash receipts are forecast to fall $25.7 billion (6.8 percent) in 2016, led by an $18.7-billion (9.8 percent) drop in animal/animal product receipts and a $7.1-billion (3.7 percent) decline in crop receipts. Nearly all major animal specialties—including dairy, meat animals, and poultry/eggs— are forecast to have lower receipts, as are feed crops and vegetables/melons, down $3.2 billion (5.5 percent) and $1.5 billion (7.5 percent), respectively. Direct government farm program payments are projected to rise $2.7 billion (24.8 percent) to $13.5 billion in 2016, in part due to the expected price environment.

Farm asset values are forecast to decline by 2.2 percent in 2016, and farm debt is forecast to decrease by 0.8 percent. Farm sector equity, the net measure of assets and debt, is forecast down by $61.2 billion (2.4 percent) in 2016. The decline in assets reflects a 1.5-percent drop in the value of farm real estate, as well as declines in animal/animal product inventories, financial assets, and machinery/vehicles. The decline in farm debt is driven by lower nonreal estate debt (down 4.6 percent), reflecting a change in farmers’ management decisions (such as reducing input expenditures) but also an increase in short-term commercial bank loan rates, which make debt more expensive.

Source: USDA