Do you feel wealthier? According to USDA statisticians, you are. Income for the average farm operator household, the number crunchers say, will be above the average for non-farm households.
After being sub-par in terms of income equity for nearly all of the 20th century, farmer households finally achieved equality with non-farm households in the early 1990s. By the mid-'90s, farm households moved ahead and they've continued to gain. In 2002, the last year for which Census Bureau data are available, the average farm household income was $8,000 greater than the average for non-farm. Projections are that 2003 figures will show a further 2 percent increase to an average $67,453.
The analysts expect, however, a 1 percent decline in 2004, to $66,732, but farm household incomes will likely remain above the U.S. norm. A projected increase in off-farm earnings of about 3 percent is not expected to be enough to offset the anticipated reduction in household income from farm sources — potentially leaving income down a relatively small amount for the first time in four years.
Households that operate commercial-size farms ($250,000 and up) and rural residential farms (which tend to lose money from farming, but derive most of their income off-farm) are expected to have incomes “well above the average for all U.S. households.”
Despite the slight dip in income, the value of farm business assets is expected to increase by 3 percent, say Mitchell Morehart and James Johnson, agricultural economists with USDA's Economic Research Service. The value of farm real estate, which accounts for more than 80 percent of farming's assets, is projected to increase by 3.5 percent.
“Farm business debt is expected to rise less than 3 percent, exceeding $205 billion by the end of 2004,” according to their report, presented at USDA's annual Agricultural Outlook Forum. “That compares to $200 billion-plus in 2003” (which was a record).
Farm sector equity/net worth is expected to rise more than 3 percent as, in dollar terms, the gain in asset values exceeds the increase in debt levels by $36 billion.
“Farm business balance sheets have stabilized over the past 20 years,” the report notes. Because farm real estate values have risen faster than farm mortgage debt, the degree to which farmland is leveraged has declined slightly.
“This has provided farm investors with an added equity cushion to lessen the impact of any short-term decline in income or asset values. While the rise in debt in recent years may have resulted in additional financial difficulty for some farm operators, it does not indicate widespread financial distress in the farm sector.” Sixty percent of farm operator households reported no farm debt outstanding (but about 40 percent of those had existing loan balances for non-farm purposes).
In 2004, the economists say, farmers will use about 60 percent of the debt that could be supported by their current incomes.
The average value of farm assets on family farms is forecast to be about $573,000 in 2004. With average farm debt of about $72,000, the average net worth of family farm businesses is expected to exceed $500,000.