SDA today forecast net farm income for this year at $65.7 billion, up from a February projection but down $9.8 billion, or 13 percent, from 2017, when the broad measure of farmland profits increased nearly 23 percent.
The department’s Economic Research Service said that in inflation-adjusted 2018 dollars, net farm income is expected to drop $11.4 billion for the year, after increasing $13 billion (20.3 percent) in 2017. If realized, inflation-adjusted net farm income for 2018 would be just slightly above 2016, which was its lowest level since 2002.
The report indicated net farm income forecast for this year will be $6.2 billion higher than forecast in February. Carrie Litkowski, a senior economist at ERS and the agency’s farm income team leader, said the revision was primarily due to more and better data.
The earlier 2017 figure, she said, “was a forecast; that was converted to an estimate,” she said during an ERS webinar following the report’s release. The farm income report will be revised again in November.
The report also forecast a $12.4 billion (12 percent) drop in net cash farm income to $91.5 billion. That figure encompasses cash receipts from farming as well as farm-related income, including government payments, minus cash expenses. Net farm income is a more comprehensive measure that incorporates noncash items, including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings.
ERS noted that its 2018 forecasts, including net farm income, net cash farm income, and government payments, do not include payments under the recently announced Market Facilitation Program, which was designed to assist farmers in response to trade disputes. It said its forecasts are developed assuming a continuation of existing policies and that it’s too early to tell how many producers would complete the MFP enrollment process and receive a payment in 2018 versus 2019.
Litkowski said, however, that the report does take into account effects of the government’s tariff policies, as reflected in the July World Agriculture Supply and Demand Estimates, or WASDE report. Today’s report “considers the trade situation at the time the forecasts were made,” she said.
According to the report, cash receipts for all commodities are forecast to remain nearly stable in 2018 at $374 billion. Both total animal/animal product and total crop receipts are forecast to be relatively unchanged from 2017 as increases in receipts for some commodities are offset by declines in other commodities.
Receipts for milk are expected to decline $2.8 billion (7.4 percent) in 2018 while receipts for poultry/eggs are expected to increase $5.2 billion (12.1 percent). A forecast $800 million (1.8 percent) decrease in corn receipts will be partially offset by a forecast $500 million (6.3 percent) increase in receipts for wheat.
Here are some other highlights from today’s report:
• Direct government farm payments are forecast to decline $2 billion (17.4 percent) to $9.5 billion in 2018, mostly due to lower anticipated Agriculture Risk Coverage and Price Loss Coverage program payments.
• Total production expenses (including operator dwelling expenses) are forecast up $11.8 billion (3.3 percent) in nominal terms to $365.9 billion in 2018, led by increases for fuels/oil, interest, feed, and hired labor.
• The farm business average net cash farm income is forecast to decline $16,600 (19.9 percent) to $66,700 in 2018. This would be the fourth consecutive drop since 2014 and the lowest average income recorded since the series began in 2010. All categories of farm businesses are expected to see declines with dairy farm businesses expected to see the largest decline.
• Farm sector equity is forecast up by $21.8 billion (0.8 percent) to $2.62 trillion in 2018. Farm assets are projected to increase by $35.6 billion (1.2 percent) to $3.0 trillion in 2018, reflecting an anticipated 1.8-percent rise in farm sector real estate value.
• Farm debt is forecast to increase by $13.8 billion (3.5 percent) to $406.9 billion, led by an expected 4.4-percent rise in real estate debt. The farm sector debt-to-asset ratio is expected to rise while the total rate of return to farm assets is expected to decline in 2018.