WASHINGTON, D.C. — The recent projections of U.S. farm income released by the USDA in its August 2017 Farm Sector Income Forecast suggested while farm income may have hit rock bottom in 2016, there will be an uptick in both net farm and net cash income in 2017.
That’s according to Bob Young, American Farm Bureau Federation chief economist, who explained livestock sales are driving the slight increase. “It is just kind of a minor bump, but is a bump as opposed to continuing to fall,” he said. “The livestock side really drove most of that increase. The crop revenue side (crop receipts) are effectively flat in 2017, relative to 2016.”
The USDA’s Economic Research Service’s (ERS) release of its August forecast is the first revision of the initial net farm income forecast released by the agency since February. While forecasts for both livestock and crop cash receipts are promising, Young said livestock cash receipts will increase by 4.8 percent and crop cash receipts will increase by 1.6 percent in 2017.
With an increase predicted, however, he cautioned that the year’s overall farm income is difficult to predict.
“Give me a weather forecast and I’ll give you a farm income forecast at this stage in the game,” he said. “We’ve got some of the strongest demand we’ve ever had, but we also have some of the strongest production that we’ve ever had.
“So, it probably would take a little bit of a production pullback for prices to really pop, but wouldn’t take much of a production pullback for that to happen.”
After three consecutive years of decline, the USDA stated net cash and net farm income are both forecast to rise in 2017, relative to 2016 estimates, adding that net cash farm income for 2017 is forecast at $100.4 billion, up $11.2 billion (12.6 percent) from 2016.
“Net farm income, a broader measure of profits, is forecast at $63.4 billion, up $1.9 billion (3.1 percent) relative to 2016,” the agency added. “The stronger forecast growth in net cash income is largely due to an additional $9.7 billion in cash receipts from the sale of crop inventories.
“The net cash farm income measure counts those sales as part of current-year income, while the net farm income measure counted the value of those inventories as part of prior-year income.”
Overall, the USDA said cash receipts are forecast to increase $14.1 billion (4 percent) in 2017, reflecting an 8.4 percent increase in animal/animal product receipts. The agency noted most animal and animal product prices are expected to rise, while crop prices overall are expected to decline; quantities sold are forecast to increase for both crops and livestock.
“Thus, rising quantities sold for crops and livestock account for nearly 90 percent of the forecast rise in 2017 cash receipts,” the USDA stated. “In particular, cash receipts for broilers, hogs and cattle/calves are expected to see strong growth in 2017 after posting significant declines in 2016.
“Crop cash receipts in total are forecast to remain nearly unchanged from 2016 levels.”
Moreover, the annual value of U.S. agricultural sector production is expected to rise $6.5 billion (1.6 percent) in 2017, as increases expected for the value of animals/animal products and farm-related income more than offset a predicted decrease in the value of crop production.
If realized, the USDA said the forecast 2017 value of crop production ($180.5 billion, the lowest total since 2010) would represent a decline of $8.5 billion (4.5 percent) from 2016.
Similar to national trends, Dave Miller – Iowa Farm Bureau federation director of research and commodity services – said Iowa’s livestock producers should also see an uptick in net farm income this year, with pork production leading the way.
“By mid-2017, Iowa’s market hog numbers were 8 percent larger than a year ago and prices were about equal to a year ago, resulting in significant growth in net cash income,” he said.
“The number of beef cattle on feed in Iowa are also up about 8 percent from a year ago. While fed cattle prices are a bit softer than last year (down about 1.5 percent for the year), net cash income from feeding cattle is 5 to 6 percent greater than a year ago.”
Miller said corn prices are down about 4 percent in 2017, but Iowa farmers have been marketing a record crop from 2016. However, many Iowa soybean producers saw record soybean yields in 2016, and prices so far in 2017 have been about equal to a year ago.
“Cash income from soybeans is up so far this year,” he noted. “Harvest prospects for soybeans for 2017 are not as robust as a year ago and, at the moment, it appears that harvest time prices will be somewhat lower than those seen at harvest time in 2016.”
Given recent projections, Young offers this planning advice to farmers: “For planning purposes, I‘d say that at the very least where we’re at is probably where we’re going to be for a while, so put your business plans together accordingly.”
The next scheduled forecast release is Nov. 29. To read the entire August forecast online, visit www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-sector-income-forecast