By Chris Clayton
DTN Ag Policy Editor
OMAHA (DTN) -- USDA is offering a bleak outlook for net farm income this year with new projections Tuesday citing net farm income for 2015 will fall 36% from last year, the sharpest one-year decline since 1983.
If the figures hold true, net farm income would come in at about $58.3 billion in 2015, down from $91.1 billion in 2014, USDA's Economic Research Service stated in a report on Tuesday.
To cast the figure in an even darker light, farmers in 2015 will earn 53% less than in 2013 when net farm income hit a record high of $123.7 billion. That would be the lowest net farm income earned since 2006.
"Across nearly all measures, farm sector profitability is forecast to decline for the second straight year," ERS stated.
Crop receipts for 2015 are expected to be $12.9 billion less than 2014 with corn receipts down $7.1 billion. Soybean receipts are projected at $3.4 billion lower, and wheat would be down $1.6 billion from 2014, USDA stated. It expects growers to accelerate sales of 2015 crops this year to help generate more cash, in effect moving what would have been 2016 income ahead.
Livestock sees an even steeper decline of $19.4 billion -- 9.1% below 2014. This is mainly due to lower milk and hog prices, USDA cited.
Along with lower markets, farmers will see higher government payments, which are projected to increase 16% to $11.4 billion in 2015.
While farmers are seeing livestock and crop receipts fall, expenses aren't declining as rapidly. Production expenses are estimated to be down $1.5 billion this year, just 0.5%. Until now, production expenses had increased 8% annually from 2010 to 2014 and compressed grower margins.
All of this leads to a projected decline in farm asset values of 3.5% compared to 2014 while farm debt is expected to increase 5.8%. The primary driver for the decline in assets is lower real-estate value, which is down $49 billion from 2014, or about 2.1%. At the same time, debts for both real estate and non-real estate assets are up.
At the moment, land-grant university economists are predicting Midwest corn and soybean producers who rent ground may need to cut $100 per acre or more off their 2016 budgets just to breakeven. Should U.S. crop producers suffer a third year in a row of negative returns, farm real estate values will likely absorb a larger hit in 2016, said USDA economist Mitch Morehart. "That would affect people's expectations of what's a reasonable return for land."
Median household income for farmers is expected to dip slightly from $80,620 in 2014 to $79,287 for 2015. USDA forecasts that lower farm receipts would somewhat be offset by higher non-farm income for those families that have off-farm jobs.
For more information, go to USDA's Economic Research Service website, http://dld.bz/…
Chris Clayton can be reached at Chris.Clayton@dtn.com
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