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Corn+Soybean Digest

38% Drop In Net Farm Income Forecast

"Unfortunately, these market conditions will likely be with us for a while, and many producers are adjusting their shot-term production plans and just trying to wait out the storm."

Net farm income is forecast to be $54 billion in 2009, down $33.2 billion, or 38%, from the preliminary estimate of $87.2 billion for 2008, according to the USDA’s Economic Research Service (ERS).

The 2009 forecast is $9 billion below the average of $63.2 billion in net farm income earned in the previous 10 years. “In 2009, crop prices have continued to decline, and prices for livestock animals and products have experienced sharp declines,” the ERS noted in its Farm Income Forecast 2009.

“With economic conditions deteriorating worldwide, demand for exports has tailed off, with few options available to expand marketing elsewhere. Sharply declining demand in 2009 has forced farmers to accept prices that are lower than were expected earlier in the year when production plans were made.”

The forecast “is a very sobering summary of our current economic situation. Farmers are responding to the markets’ collapse by slashing costs any way and everywhere possible,” says Tony Banks, a commodity marketing specialist for the Virginia Farm Bureau Federation. “Unfortunately, these market conditions will likely be with us for a while, and many producers are adjusting their short-term production plans and just trying to wait out the storm.”

In the short term, Banks notes, consumers might benefit from lower retail prices, “but if this economic situation continues, more farmers will be pushed out of business.”
If that happens, “everyone stands to feel that loss in the grocery store, and rural communities stand to feel it on Main Street, as well,” he says.

On the input side, the ERS notes, “prices are also projected to be lower than in 2008, particularly for most manufactured inputs, feed and services such as repairs or transportation. Overall, the reduction in gross income will far exceed the reduction in production costs.”

The 2007 and 2008 increases in farm expenses, at $34.8 billion and $22.5 billion, respectively, were the largest year-over-year absolute changes on record. The $9.2 billion decline in expenses projected for 2009 would still leave farm expenses 5% higher than in 2007.

The average family farm household income for this year is forecast to be $75,895, down 5.2% from 2008 and 8% below the five-year average for 2004-2008. The average family farm is forecast to receive 7.6% of its household income from farm sources, with the rest from off-farm sources.

The 2007 Census of Agriculture found that 45% of U.S. principal farm operators identified farming as their primary occupation.

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