US farm sector profitability expected to weaken in 2015

Across nearly all measures, farm sector profitability in the United States is forecast to decline for the second straight year, according to the USDA’s Economic Research Service. Net cash income is forecast at $100.3 billion, down about 21 percent from 2014 levels. Lower crop and livestock receipts are the main drivers of the change in 2015 net cash farm income from 2014, while cash production expenses are projected down by 1.1 percent. Net farm income is forecast to be $58.3 billion in 2015, down 36 percent from 2014’s estimate of $91.1 billion. The 2015 forecast for net farm income would be the lowest since 2006 (since 2002 in inflation-adjusted terms) and a drop of nearly 53 percent from the record high of $123.7 billion in 2013. As a measure of profitability, net cash farm income is generally less variable over time than the broader net farm income measure. One explanation is that it is possible to exercise greater control on the timing of cash receipts and expenses and thereby moderate large swings from year to year.

Crop receipts for 2015 are expected to decrease by $12.9 billion (6.2 percent) in 2015, led by a projected $7.1-billion decline in corn receipts, $3.4 billion in soybean receipts, and $1.6 billion in wheat receipts compared to 2014. Livestock receipts are forecast to decrease by $19.4 billion (9.1 percent) in 2015 largely due to lower milk and hog prices. Government payments are projected to rise 16 percent ($1.6 billion) to $11.4 billion in 2015. Total production expenses are forecast to decrease by $1.5 billion (less than 0.5 percent) in 2015.

Farm asset values are forecast to decline by 3.5 percent compared to 2014, and farm debt is forecast to increase by 5.8 percent. The farm sector equity measure combines both of these, and is down by $123.9 billion, or 4.8 percent compared to 2014. The primary driver of the drop in asset values is farm real estate, down $49 billion (2.1 percent). Debt is driven by increases in both real estate debt (up 5.3 percent) and nonreal estate debt (up 6.5 percent). While the movements in the balance sheet show an increasingly leveraged farm sector, financial risk ratios remain in acceptable ranges for now.




The median income of farm households has increased steadily over the past 5 years, peaking at an estimated $80,620 in 2014. However, farm household median income is forecast to decrease slightly in 2015, to $79,287. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. The projected median farm income of -$1,504 is lower than the 2014 estimate of -$869. Most farm households earn all of their income from off-farm sources—median off-farm income is forecast to increase 4 percent in 2015 to $72,494. (Note: Because they are based on unique distributions, median total income will generally not equal the sum of median off-farm and median farm income.)



U.S. Secretary of Agriculture Tom Vilsack made the following statement:

“Today’s farm income forecast is heartening for all Americans. The past several years have seen unprecedented highs in farm income, and despite the fact that farm income is forecast to be down from record levels, today’s projections provide a snapshot of a rural America that continues to remain stable and resilient in the face of the worst animal disease outbreak in our nation’s history and while the western United States remains gripped by drought. Thanks to its ability to be competitive through thick and thin, American agriculture remains fundamentally sound, supporting and creating good-paying American jobs for millions.

“The American agriculture success story is not celebrated often enough. That success is due, in part, to U.S. farmers’ bold willingness to seize opportunities in new markets, both domestic and foreign, and harness the best of American technology and innovation. At the same time, markets continue to expand for locally-grown food, a market valued at $11.7 billion last year, and America’s biobased economy has emerged as a new frontier for U.S. growth. The country’s biobased industry contributed 4 million jobs and $369 billion to the economy in 2013, while displacing about 300 million gallons of petroleum-equivalent to taking 200,000 cars off the road. American agriculture achieved record exports last year and USDA continues to pursue strong new trade deals so that farm and ranch businesses don’t miss out on new markets for their products.

“Since 2009, USDA, under President Obama, has made historic investments in rural America and American agriculture. Two-thirds of all rural counties gained jobs over the past year and the overall economy continues a record-breaking pace of 65 straight months of private-sector job growth. USDA and the Obama Administration will continue to stand with America’s farming families, small businesses and rural communities as they build a brighter future for our country on the land that they love.”

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