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ERS projects 38 percent drop for net farm income

 

By STAN MADDUX
Indiana Correspondent

WASHINGTON D.C. — Farmers in the United States are having to really tighten their belts, judging by a noticeable drop projected in their incomes for 2015.
The USDA’s Economic Research Service (ERS) is forecasting a 38 percent decline in net farm income, from $90.4 billion in 2014 to $55.9 billion in 2015. If realized, the drop would be the largest since 2002 and a decline of 55 percent from the high of $123.3 billion in 2013, said Jeff Hopkins, ERS chief economist, during a Nov. 24 webinar.
A 28 percent decline from last year is also forecast in the narrower category of net cash farm income projected this year, at $93 billion, the lowest reported since 2009.
Lower crop prices off several years of record yields is a major contributor to the drop in farm income, but so is a dip in receipts for livestock. According to the ERS report, crop receipts are projected to be down 8.7 percent, or $18.2 billion, in 2015, while the amount of cash brought in for livestock is expected to drop 12 percent, or $25.4 billion, from last year.
The drop in crop receipts was led by projected declines of $8.6 billion in corn receipts, $5.7 billion in soybean receipts and $2.7 billion in wheat receipts. The drop in livestock receipts is from lower prices for milk, hogs and broilers, along with cattle and calves.
Helping to stem falling incomes was a reduction in production costs in 2015 by 2 percent, or $7.7 billion less than the previous year, largely from lower fuel prices, according to the ERS.
The cost of fuel and oil is forecast to be down 26.7 percent for the current year, while the price for diesel is predicted to drop 34 percent in 2015.
A $1 billion increase equaling 10 percent in government payments to farmers in 2015 kept incomes from dropping even more.  “That helps the bottom line,” said Hopkins.
With yields in 2015 being closer to average due to more volatile weather conditions primarily in the spring, dropping incomes from lower commodity prices could not be overcome through higher output.
“There was a slight reduction in total quantities, but the overall driver is the lower prices,” said Hopkins, who noted it was only the third time since 2000 that production costs on the farm dropped.
The financial projections from ERS weren’t any better in terms of net worth, with overall farm debt in 2015 up 6.3 percent and farm equity down by 4.8 percent, and lower farmland values among the cited factors. “The debt-to-asset ratio has been increasing every year since 2012,” said Hopkins.
On a positive note, the amount of farm equity is still rather high in terms of historical levels and about average for the past 15 years, he said.
Household farm income is also projected to be less in 2015, but only slightly, from $80,620 in 2014 to $78,284.
The biggest reason is a majority of the money in farm households is earned from off-farm sources, an area that is projected to see income gains in 2015 by 3.6 percent, according to the ERS.
Hopkins was reluctant to speculate on 2016 with the next ERS forecast not due until February, but going into the new year he did say farmers can be expected to avoid unnecessary expenses in areas like new machinery and other equipment. “They’ll be paying a lot of attention to where their money goes,” he explained.
12/3/2015