US farm sector profit set to fall, again

Farm sector profitability in the United States is forecast to decline for the third straight year, according to the latest estimates form the USDA’s Economic Research Service. Net cash farm income is forecast at $90.9 billion, down about 2.5 percent from the 2015 forecast levels. Net farm income is forecast to be $54.8 billion in 2016, down 3 percent. If realized, 2016 net farm income would be the lowest since 2002 (in both real and nominal terms) and a drop of 56 percent from its recent high of $123.3 billion in 2013.

Cash receipts are forecast to fall $9.6 billion (2.5 percent) in 2016, led by a $7.9-billion (4.3 percent) drop in animal/animal product receipts and a $1.6-billion (0.9 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 vegetables/melons and feed crops. While overall cash receipts are declining, receipts for several commodities are expected to increase by at least 1 percent relative to 2015 forecast levels. Direct government farm program payments are projected to rise $3.3 billion (31.4 percent) to $13.9 billion in 2016 in response to the expected price environment.

Farm asset values are forecast to decline by 1.6 percent in 2016, and farm debt is forecast to increase by 2.3 percent. Farm sector equity, the net measure of assets and debt, is forecast down by $55 billion (2.2 percent) in 2016. The decline in assets reflects a drop in the value of farm real estate, as well as declines in crop inventories and financial assets. The increase in farm debt is driven by increases in both real estate debt (up 1.1 percent) and nonreal estate debt (up 3.8 percent).

Agriculture Secretary Tom Vilsack issued the following statement today on the Farm Income and Financial Forecasts for 2015 and 2016, released by USDA’s Economic Research Service.

“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 percent. 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. For those producers challenged by weather, disease and falling prices, we have built a strong safety net to help keep them farming or ranching another season. During the same time period, rural communities have been infused with billions of dollars to build schools, hospitals, and public safety headquarters.

“Businesspeople and businesses of all sizes have availed themselves of USDA’s business loans and grants to spur growth that complements the agricultural economy. We’ve brought new or improved high-speed internet service to six million Americans in rural areas, along with investments in electricity, water and wastewater, and clean power. Taken together, these investments are strengthening rural communities.

“And we will continue to stand with farming families, small businesses and rural communities as they continue to help our country build a brighter future. Thanks to their ability to remain competitive through thick and thin, America’s farming families continue to be respected the world over for their high-quality goods, ability to manage risk and their capacity to reshape rural communities with biobased innovations that have led to increased job opportunities.

“Overall, net farm income for all producers is forecast down slightly, 3 percent, 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 percent 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 U.S. 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.”

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