Net farm income is forecast to be $113.2 billion in 2014, down about 14% from 2013's forecast of $131.3 billion, but up from the year's earlier estimates, the USDA Economic Research Service said Tuesday.
The 2014 forecast would be the lowest since 2010, but would remain $25 billion above the previous 10-year average.
Net cash income is forecast at $123 billion, down almost 6% from the 2013 forecast. Net cash income is projected to decline less than net farm income primarily because it reflects the sale of more than $10 billion in carryover stocks from 2013.
Crop values decline
Crop farmers are likely to bear the brunt of the downturn as lower cash receipts for crops and higher production expenses will cut into income.
Crop receipts are expected to decrease more than 7% in 2014, led by a projected $12.8 billion decline in corn receipts and a $6 billion decline in soybean receipts, USDA said.
The elimination of direct payments under the Agricultural Act of 2014 also resulted in a projected 15% decline in government payments.
Related: Is Ag Headed for a Soft Landing?
Among the farm commodities, corn, soy and wheat receipts are all expected to fall. Receipts for wheat will reflect lower production and price and an expected drop in exports in marketing year 2014.
Declines in soybean receipts are anticipated as higher production and quantities sold are more than offset by large price declines of 11.3%. Soybean exports are expected to increase in the 2014 soybean marketing year.
Livestock receipts on the way up >>
Livestock receipts are forecast to increase by more than 15% in 2014 largely due to higher prices, USDA said. Dairy and poultry products are also expected to fetch record-high annual prices.
While beef production is expected to decline in 2014, the annual cattle price is expected to increase dramatically – 20.4% -- to its highest level on record. Cattle and beef prices have benefited from foreign demand, especially Asia, and low cattle inventories.
Hog receipt forecasts also reflect declining production accompanied by record high prices, the forecast noted. Forecasts for wholesale milk, broilers, and chicken egg receipts reflect expectations of higher production accompanied by record annual average prices.
Total production expenses are forecast to increase $14.2 billion in 2014, extending the upward movement in expenses that has occurred over the past five years, USDA says.
Livestock and poultry purchases account for the largest portion of the increase in total expenses at $5.4 billion, 22.6% increase over 2013 purchases. Other components that contribute to the increase, but rise by smaller amounts, are fuels and oils (up $1.0 billion); repairs and maintenance ($1.1 billion); total labor expenses ($1.4 billion); and miscellaneous expenses (including animal health and breeding expenses, contract production fees, irrigation water, and general production and management expenses).
Seed and fertilizer expenses will also rise nearly $1 billion, USDA says, though feed expenses should fall $1.7 billion and net rent to non-operators is expected to be down $0.9 billion.
Overall, the value of farm assets is expected to rise 2.3% in 2014, while farm sector debt is expected to increase 2.7%. This represents a noticeable reduction in the average annual growth in each of these measures compared with the last 10 years.
The outlook itself, however, is improved from February. This is largely the result of improved prospects for the value of both crop and livestock production, USDA says, reflecting more optimistic price expectations over calendar-year 2014, relative to expectations in February.
In addition, direct U.S. government payments have been revised upward since February’s forecast, mostly due to drought-induced payouts under the Livestock Forage Program.
Continue reading USDA's 2014 Farm Sector Income Forecast.