WASHINGTON, D.C., U.S. — Amid uncertainty resulting from ongoing trade disputes, particularly with China, which were expected to narrow certain export outlets for U.S. agricultural products, the U.S. Department of Agriculture forecast U.S. net farm income to decline in 2018, resuming a downtrend that began in 2013 and was interrupted only once in subsequent years, in 2017, when income managed a bounce.
The USDA’s Economic Research Service forecast U.S. net farm income in 2018 at $65.7 billion, down $9.8 billion, or 13%, from $75.5 billion in 2017. Net cash farm income was forecast at $91.5 billion, down $12.4 billion, or 12%, from $104 billion in 2017.
The ERS explained net cash farm income encompasses cash receipts from farming as well as farm-related income, including government payments, minus cash expenses, whereas net farm income is a more comprehensive measure that incorporates noncash items, including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings.
“In inflation-adjusted 2018 dollars, net farm income is forecast to decline $11.4 billion, 15%, from 2017 after increasing $13 billion, or 20%, in 2017,” the E.R.S. said. “If realized, inflation-adjusted net farm income would be just slightly above its level in 2016, which was its lowest level since 2002. Inflation-adjusted net cash farm income is forecast to decline $14.6 billion, 14%, from 2017 to $91.5 billion, which would be the lowest real-dollar level since 2009.”
Importantly, the ERS noted its 2018 forecasts for U.S. farm sector income and finances — including government payments, net farm income and net cash farm income — do not include payments under the Market Facilitation Program detailed in August to assist farmers affected by ongoing trade disputes.
“ERS forecasts are developed assuming a continuation of existing policies,” the agency explained. “At the time the August forecast was released, it was too early to tell how many producers would complete the MFP enrollment process and receive a payment in 2018 versus 2019, or how the eligibility criteria would impact the total level of payments (which would change calendar year 2018 farm income totals).”
The signup period for MFP began on Sept. 4. The USDA forecast that the initial round of payments to producers, which will be based on half of a producer’s total production in 2018 multiplied by the MFP rate set for a specific commodity, would total about $4.7 billion. The USDA will determine whether a second round of payments is required at a later date.
The ERS forecast cash farm receipts for all commodities in 2018 at $374 billion, nearly stable with 2017. Both total animal/animal product and total crop receipts were forecast to be relatively unchanged from 2017 as increases in receipts for some commodities are offset by declines in other commodities.
Receipts for milk were expected to decline $2.8 billion, or 7%, in 2018, while receipts for poultry/eggs were expected to increase $5.2 billion, or 12%. A forecast $0.8 billion (2%) decrease in corn receipts will be partially offset by a forecast $0.5 billion (6%) increase in receipts for wheat.
In the case of soybeans, which were targeted by China in its retaliatory tariffs, the USDA forecast cash receipts in 2018 to dip slightly ($39.1 million, or 0.1%) as an anticipated price decline more than offset higher expected quantities sold. The ERS explained, “Roughly half of the forecast value for 2018 soybean cash receipts is from 2017-18 crop marketing year production that was sold prior to China raising import tariffs on U.S. soybeans by 25%. While prices for soybeans are expected to drop in calendar year 2018, overall soybean production quantities are expected to be up slightly in both the 2017-18 and 2018-19 crop marketing years.”
Direct government farm payments were forecast to decline $2 billion, or 17%, to $9.5 billion in 2018, with most of these declines due to lower anticipated Agriculture Risk Coverage and Price Loss Coverage program payments.
Total farm production expenses (including operator dwelling expenses) were forecast up $11.8 billion, or 3%, in nominal terms to $365.9 billion in 2018, led by increases for fuels/oil, interest, feed and hired labor.
The ERS forecast the farm business average cash farm income at $66,700 in 2018, down 20% from 2017.
“This would be the fourth consecutive decline since 2014 and the lowest average income record since the series began in 2010,” the ERS said.
All categories of farm businesses were expected to see declines with dairy farm businesses expected to see the largest decline, the ERS said. Additionally, every resource region of the country was forecast to see farm business average net cash farm income decline as well.
Farm sector equity was forecast at $2.62 trillion in 2018, up $21.8 billion, or 1%, from 2017. Farm assets were forecast at $3 trillion in 2018, up $35.6 billion, or 1%, reflecting an anticipated 2% rise in farm sector real estate value.
Farm debt was forecast to increase by $13.8 billion (4%) to $406.9 billion, led by a 4% rise in real estate debt. The farm sector debt-to-asset ratio was expected to rise while the total rate of return to farm assets was expected to decline in 2018.
Farm households typically receive income from both farm and off-farm sources. The total median income of U.S. farm households increased steadily from 2010 to 2014, reaching an estimated $81,637 in 2014 in nominal terms. Median household income fell 6% in 2015 and has since decreased slightly. It was forecast to fall 1% in 2018 from its 2017 level (3% in inflation-adjusted terms) to $75,474.
Median farm income earned by farm households was a negative $800 in 2017 and was forecast to decline to a negative $1,621 in 2018.
In recent years, slightly more than half of farm households have had negative farm income each year. Most of these households earn positive off-farm income — and median off-farm income was forecast to increase 3% from $67,500 in 2017 to $69,392 in 2018.