U.S. slashes forecast for 2015 farm incomes (From Reuters)

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Reuters Markets | Tue Aug 25, 2015 2:36pm EDT Related: STOCKS, MARKETS, EARNINGS
U.S. slashes forecast for 2015 farm incomes
CHICAGO
Aug 25 U.S. farm incomes will drop by more than half from their peak two years ago, according to U.S. Department of Agriculture estimates issued on Tuesday that signal deeper pain for sellers of agricultural equipment and land.

The USDA projected farm incomes this year will drop 36 percent from 2014 to $58.3 billion due to declining crop and livestock prices. The forecast is down 20 percent from the USDA's February estimate of $73.6 billion.

If realized, the decline would bring farm incomes to their lowest level since 2002 when adjusted for inflation, according to the USDA. Income will be down about 53 percent from a record high of $123.7 billion in 2013, when crop supplies were tighter.

"The data confirms the deteriorating fundamentals in the farm economy," JP Morgan analyst Ann Duignan said in a note.

Corn futures have lost about 30 percent on the Chicago Board of Trade over the past two years following bumper harvests, while soybean futures are down about 37 percent.

Deere & Co, the largest maker of farm equipment, last week reported that third-quarter profit tumbled 40 percent on weak demand for agricultural equipment and gave a bleaker forecast for fourth-quarter sales.

(Reporting by Tom Polansek; Editing by Meredith Mazzilli)

 

[jeff9366]

National & World Ag News Headlines
Farm Sector Profitability Expected to Weaken
USAgNet - 08/26/2015

Across nearly all measures, farm sector profitability is forecast to decline for the second straight year, reports the USDA's Economic Research Service. Net cash income is forecast at $100.3 billion, down about 21 percent from 2014 levels. Lower crop and livestock receipts are the main drivers of the change in 2015 net cash farm income from 2014, while cash production expenses are projected down by 1.1 percent. Net farm income is forecast to be $58.3 billion in 2015, down 36 percent from 2014’s estimate of $91.1 billion. The 2015 forecast for net farm income would be the lowest since 2006 (since 2002 in inflation-adjusted terms) and a drop of nearly 53 percent from the record high of $123.7 billion in 2013. As a measure of profitability, net cash farm income is generally less variable over time than the broader net farm income measure. One explanation is that it is possible to exercise greater control on the timing of cash receipts and expenses and thereby moderate large swings from year to year.

Crop receipts for 2015 are expected to decrease by $12.9 billion (6.2 percent) in 2015, led by a projected $7.1-billion decline in corn receipts, $3.4 billion in soybean receipts, and $1.6 billion in wheat receipts compared to 2014. Livestock receipts are forecast to decrease by $19.4 billion (9.1 percent) in 2015 largely due to lower milk and hog prices. Government payments are projected to rise 16 percent ($1.6 billion) to $11.4 billion in 2015. Total production expenses are forecast to decrease by $1.5 billion (less than 0.5 percent) in 2015.

Farm asset values are forecast to decline by 3.5 percent compared to 2014, and farm debt is forecast to increase by 5.8 percent. The farm sector equity measure combines both of these, and is down by $123.9 billion, or 4.8 percent compared to 2014. The primary driver of the drop in asset values is farm real estate, down $49 billion (2.1 percent). Debt is driven by increases in both real estate debt (up 5.3 percent) and nonreal estate debt (up 6.5 percent). While the movements in the balance sheet show an increasingly leveraged farm sector, financial risk ratios remain in acceptable ranges for now.

"Today's farm income forecast is heartening for all Americans. The past several years have seen unprecedented highs in farm income, and despite the fact that farm income is forecast to be down from record levels, today's projections provide a snapshot of a rural America that continues to remain stable and resilient in the face of the worst animal disease outbreak in our nation's history and while the western United States remains gripped by drought," said U.S. Ag Secretary Tom Vilsack. "Thanks to its ability to be competitive through thick and thin, American agriculture remains fundamentally sound, supporting and creating good-paying American jobs for millions."

The median income of farm households has increased steadily over the past 5 years, peaking at an estimated $80,620 in 2014. However, farm household median income is forecast to decrease slightly in 2015, to $79,287. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. The projected median farm income of -$1,504 is lower than the 2014 estimate of -$869. Most farm households earn all of their income from off-farm sources--median off-farm income is forecast to increase 4 percent in 2015 to $72,494.

 

[oldnslo]

The median income of farm households has increased steadily over the past 5 years, peaking at an estimated $80,620 in 2014. However, farm household median income is forecast to decrease slightly in 2015, to $79,287. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. The projected median farm income of -$1,504 is lower than the 2014 estimate of -$869. Most farm households earn all of their income from off-farm sources--median off-farm income is forecast to increase 4 percent in 2015 to $72,494.

I like this statement saying that the majority of farm income is from off farm sources. I.e. the wife works in town to pay the house hold bills while the farm barely supports itself.