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Has U.S. farm income turned a corner?

moodboard/Thinkstock Stack of $100 bill packages.
Industry shows signs of a rebound after a three-year decline.

The agriculture industry is used to weathering peaks and valleys, and this past decade provides ample evidence of that. From 2009 to 2013, net cash farm income saw a robust period of growth, only to fall back down again from 2014 to 2016. 

Is 2017 showing signs of a comeback? USDA projections certainly prompt the question. The agency’s 2017 Farm Sector Income Forecast, issued earlier this week, forecasts 2017 net cash farm income at $100.4 billion. That’s $11.2 billion – or 12.6% - higher than 2016. Net farm income (a broader profit measure) is also up $1.9 billion – or 3.1% - over 2016.

Cash receipts are forecast up 4% in 2017 but face a very uneven distribution across the agriculture industry. For example, livestock and dairy captured healthy gains, for the most part, with broiler cash receipts up 15%, milk up 11.1%, hogs up 14.6% and cattle/calves up 5.7%. Meantime, crop cash receipts are only forecast up 0.3% from 2016. Stronger performers include soybeans (6.3%), cotton (26%) and vegetables/melons (6.8%). Corn receipts will likely decline for the fifth straight year.

Farm debt-to-equity and debt-to-asset ratios were virtually unchanged from 2016. Real estate proves to be a double-edged sword here – providing the reason for both higher farm sector assets as well as higher farm sector debt.

Production expenses were a mixed bag but projected 1.3% higher overall in 2017. Interest expenses (12.8%), hired labor (5.7%) and fuel (10.8%) are all expected to be higher this year. But fertilizer prices are expected to drop another 9.9%, and feed costs are expected to decline 2.9%. 

USDA’s Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs are expected to shift in 2017. PLC could increase by about $1.6 billion, with ARC payments expected to decline by about $1.2 million.

Large increases in PLC payments are forecast for wheat, corn, grain sorghum and flaxseed. Small increases and payments will assist oats, sunflower seed and rice. Small PLC declines are forecast for peanuts and canola, and no payments are expected for soybeans.

Corn base acres should receive the majority of ARC-CO payments in 2017.


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