Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: United States
GettyImages-894647350.jpg AlbertPego/Getty Images

Government aid boosts farm income

Agriculture profits could hit five-year high.

Net farm income could reach a five-year high in 2019, according to new estimates out today from USDA. But sales from crops, livestock and other goods aren’t responsible for most of the gains contained in the latest updates on ag finances. Instead, updates to 2018 figures and government aid to offset losses from trade disputes appears to account for most of the improvement.

The agency’s Economic Research Service projected 2019 net farm income of $88 billion, up 4.8% from 2018. But both years’ estimates were revised sharply higher. In addition to $20.9 billion added to the estimate for last year, expected results for 2019 were up $18.6 billion compared to the initial figures released in March.

farm-labor-report-net-farm-income-083019.png

The first installment of the second round of Market Facilitation Program payments should add another $8 billon to farm revenues this year, according to detailed line item breakouts. The MFPs are listed as “miscellaneous programs,” which total $17.1 billion. That income would offset a sharp drop in revenues from the Agriculture Risk Coverage, or ARC program, which could be down $9.3 billion this year according to USDA.

farm-labor-report-farm-program-impact-083019.png

In all, direct government payments would rise to $19.5 billion, accounting for 17% of net farm income.

Other income gains also came in programs designed to provide a safety net for growers, including crop insurance. Total insurance payments 2019 were adjusted higher likely due in part to record prevent plant claims following a historically wet spring in many parts of the country. As a result of the lost acres, the 2019 value of crop production dropped $12.2 billion from the agency’s estimate in March. Livestock revenues also were adjusted lower, down $2.7 billion from March. Rising livestock production wasn’t enough to offset lower prices, according to the agency.

In all, the changes mean the total value of ag production would be down slightly from last year, coming in at $414.7 billion.

farm-income-report-value-farm-production-083019.png

A drop in production expenses from the March report stemming from reduced acres , including costs for fuel, labor, custom work, depreciation and seed  helped offset those lower revenues.

farm-labor-report-production-costs-083019.png

Lower interest rates were another plus for income, falling $3 billion from the earlier projection, when it looked like the Federal Reserve might keep raising interest rates. That produced a drop in both the interest as a total percentage of income and debt services as a percentage of gross sales.

farm-income-report-interest-vs-net-farm-income-083019.png

farm-labor-report-debt-service-vs-gross-sales.png

Other key ratios were mixed but showed only small changes. While the debt-to-assets ratio for agriculture went up to the highest level since 2002, the increase from last year was only two-tenths of 1%. And at 13.5% the benchmark is still far below levels reached during the 1980s farm crisis.

farm-labor-report-debt-asset-ratio-083019.png

Other ratios improved. Profit margins improved to 25%, up from 19% in 2016, when net farm income bottomed at $61.5 billion. Return on equity would be up 1% to 3%, despite total farm real estate values that continue to appreciate nationwide.

farm-income-report-profit-margin-083019.png

farm-income-report-return-equity-083019.png

 

TAGS: USDA
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish