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Agricultural News

Farm Families Hit With Lower Profitability in 2016, Down Sharply From Peak in 2013

Tue, 09 Feb 2016 17:23:02 CST

Farm Families Hit With Lower Profitability in 2016, Down Sharply From Peak in 2013 Farm sector profitability is forecast to decline for the third straight year, despite increased receipts for several commodities. That’s according to the Farm Income and Financial Forecasts for 2015 and 2016, released by the U.S. Department of Agriculture’s Economic Research Service. U.S. Agriculture Secretary Tom Vilsack said the farm income forecast showed improvement from recent years.

"Overall, net farm income for all producers is forecast down slightly, three percent, relative to 2015,” Vilsack said. “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 five 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.”

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 three percent. If realized, 2016 net farm income would be the lowest since 2002 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, about 2.5 percent in 2016, led by a $7.9-billion or 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 one 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 non-real estate debt (up 3.8 percent).

Median Income of Farm Operator Households Expected Up Slightly in 2016

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. Median farm income earned by farm households is forecast to be -$1,473 in 2016. Most farm households earn all of their income from off-farm sources-median off-farm income is forecast to increase 4.1 percent to $75,354 in 2016. (Because farm and off-farm income are not distributed identically for every farm, median total income will generally not equal the sum of median off-farm and median 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," Vilsack said. "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."

Click here for the full forecast.



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