In November last year, the USDA’s Economic Research Service released their 2018 Farm Sector Income Forecast. Here are some of the key takeaways to help you prepare for 2019.
Net farm income
Net farm income refers to the total return farm operators receive from their work. This includes non-cash items, such as economic depreciation, changes in inventories, and gross imputed rental income.
- For 2018, net farm income is expected to decrease by $9.1 billion or 12.1 percent to $66.3 billion. In 2017, net farm income rose by $13.8 billion or22.5 percent.
In terms of inflation-adjusted dollars, net farm income is forecast to decrease by 10.8 billion or 14.1 percent.
- Net cash farm income, which includes all monetary farming receipts, is expected to decline by $10.8 billion or 8.4 percent to $93.4 billion.
In terms of inflation-adjusted dollars, net cash farm income is expected to decline by $10.9 billion or 10.5 percent to $93.4 billion. If realized, USDA says it would be the “lowest real-dollar level since 2009.”
- Farm business average net cash income for 2018 is expected to decrease by $13,500 or 16.2 percent to $69,800.
If realized, this would mark the 4th consecutive year of decline since 2014 and the lowest average income since 2010. The dairy farm business is predicted to feel the brunt of the impact.
For 2018, USDA predicts that cash receipts (which covers all commodities) will increase by $2.5 billion or roughly 1 percent to $374.9 billion. These include the following:
- Crop receipts, which are forecast to increase by $3 billion or 1.7 percent due to increase in corn and soybean cash receipts;
- Animal and animal product receipts, which are expected to decrease by $0.4 billion or about 0.2 percent. Receipts from milk and meat animals are the cause, as the lower numbers are forecast to offset poultry/egg receipts.
In terms of inflation-adjusted dollars, total cash receipts for 2018 are expected to decrease by $6.1 billion or 1.6 percent. Instead of increasing, crop receipts will decline by $1.6 billion or 0.8 percent, while livestock receipts will decrease by $4.5 billion or 2.5 percent.
Direct government farm payments
For 2018, the USDA expects direct government farm payments to increase by $2.1 billion or almost 18 percent to $13.6 billion. The likely increase is attributed to the “higher anticipated payments for supplemental and ad hoc assistance and miscellaneous programs.”
Total production expenses
Due to more spending on commodities such as hired labor, fuels/oil, feed, and added interest, total production expenses for 2018 is slated to increase by $14.8 billion or 4.2 percent to a grand total of $369.1 billion.
Farm sector equity
In nominal terms, farm sector equity in 2018 is expected to increase by $26.4 billion or 1 percent to $2.63 trillion.
Thanks to the 2.1 percent increase in farm sector real estate value, farm assets will also likely increase by $42.9 billion or 1.4 percent to $3.0 trillion in 2018.
Adjusted for inflation, both farm sector equity and farm assets are expected to decline by $27.0 billion and $34.3 billion, respectively. Meanwhile, farm debt is predicted to increase by $16.4 billion or 4.2 percent to $409 billion largely due to the expected increase in real estate debt (5.4 percent.)