Farm Economy Slumps, USDA Agency Says

Times are getting tougher economically in American agriculture, a U.S. Department of Agriculture agency says.

But the pain is cushioned by rising federal safety-net payments and falling expenses, the Economic Research Service says in its updated 2016 forecast released Tuesday morning. James Williamson, an economist with the farm economy branch in the resource and rural economics division of ERS, discussed the forecast with the news media in a telephone conference Tuesday afternoon.

Another major takeaway from the forecast: Nationwide farm solvency, though deteriorating from a year ago, remains strong by historic standards, Williamson says.

The Economic Research Service’s mission “is to anticipate trends and emerging issues in agriculture, food, the environment, and rural America and to conduct high-quality, objective economic research to inform and enhance public and private decision making.”

As part of that mission, the ERS releases annual farm income statement and balance sheet estimates and forecasts in February, August and November. The new forecast, which updates its February projections, reflect planted acres and price changes, among other things, since then, Williamson says.

Among the highlights of the forecast:

  • 2016 farm receipts are projected to fall $25.7 billion, or 6.8 percent, in 2016. That reflects an estimated $18.7 billion (9.8 percent) drop in animal/animal product receipts and a $7.1 billion (3.7 percent) decline in crop receipts.
  • Cash receipts from most major ag commodities, including dairy, meat animals, corn, wheat and soybeans, will decline.
  • Direct government farm program payments are expected to increase by 24.8 percent in 2016 to $13.5 percent. Payments through both Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC), the government’s main safety net farm programs, are projected to increase sharply.
  • Farm production expenses are forecast to drop $10.1 billion, or 2.8 percent. That reflects lower fuel and fertilizer costs, as well as lower prices for inputs such as seed that originate on the farm. Net rent expense is expected to decline 2.2 percent to $19.6 billion.
  • The median income of farm households is expected to dip from $76,282 from $76,538 in 2015. The median is the middle number in a sequence of numbers. But be careful in interpreting those numbers. It reflects a 2.5 percent increase in off-farm median income, which partially offsets the drop in farm income. And farm households with an income of more than $350,000 — ones in which non-farm income generally plays a relatively small role — will be more affected by the decline in farm income than smaller operations.

The forecast also projects that farm solvency, as measured by debt to asset and debt to equity ratios, both will fall in 2016. If so, it will be the fourth straight year that’s happened.

Nonetheless, farm solvency remains relatively strong by historic measurement, especially in comparison to the early 1980s, when farm debt was particularly onerous, Williamson says.

ERS doesn’t issue forecasts for individual states.

To read the ERS forecast:

Source: Jonathan Knutson, Agweek

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