Farm income: Stable but eroding
U.S. farm income
is regaining its footing after taking a tumble early this decade in the collapse of the commodity boom. Although USDA says net farm income is higher than expected at a forecast of $65.7 billion, it will be the lowest since 2006, and the debt-to-asset ratio (an indicator of financial health) is rising for the sixth year in a row.
USDA economist Carrie Litkowski says the trend line for farm income “is relatively flatter” and showing a bit of stability after the nosedive of 2014. That said, 2018 would be the fourth year of comparatively low income. The USDA forecast, which will be updated on November 30, did not include the $4.7 billion in Trump tariff payments to producers. The aid was announced only a couple of days before the income report was released.
“Many farm families are in significant financial stress right now,” says NFU president Roger Johnson. “They are burning through equity. Farm income has been cut in half over the past five years, and a majority of family farmers are currently earning negative farm income.”
The foremost concern for economists Brent Gloy and David Widmar is the duration rather than the magnitude of decline in farm income. “The longer the downturn lasts, the more financial erosion will occur,” they write in a blog. “It will be critical to carefully monitor farm financial conditions. It is important not to become complacent about conditions that are ‘somewhat poor’ but last for a long time.” If there is no improvement, “we’d expect pressure to reduce production costs – farmland values, cash rents, etc. – to take place.”
Cash receipts from crops and livestock are expected to be roughly the same as this year as in 2017, but production costs are up by $12 billion, meaning lower income. USDA says debts are rising faster than assets, so the debt-to-asset ratio would rise to 13.4% this year; it dipped to 11.3% in the boom year of 2012.