Farm income to sink even more than expected, USDA says

By Spencer Chase

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WASHINGTON, Nov. 30, 2016 - USDA says that an already grim financial picture in the farm sector has actually gotten worse and will continue to do so.

In its November update of its farm sector income forecast, USDA's Economic Research Service predicts a drop in farm income for the third consecutive year.  Net cash farm income is forecast at $90.1 billion, down 14.6 percent from 2015, and down from $94.1 billion seen in August. Net farm income, meanwhile, is seen at $66.9 billion, a 17.2 percent drop from last year. The decreases come after the sector set record highs for farm income in 2012 and 2013.

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The animal ag sector is perhaps playing the biggest role in the decrease. Crop receipt forecasts are essentially unchanged, but animal and animal products receipts are forecast to drop $23.4 billion, about 12.3 percent, in 2016.

Some slight relief looks to be headed to producers as production expenses are predicted to fall while government payments increase. Those payments are seen rising by $2.1 billion, or just over 19 percent in 2016, pushed by a whopping 159.6 percent jump in payments under the Price Loss Coverage program and a 35.7 percent increase in the Agricultural Risk Coverage program.

For the second straight year, production expenses are expected to decrease. ERS forecasts a 2.6 percent drop in 2016 after those same expenses fell 8.1 percent in 2015. The 2016 decline is expected to total about $9.2 billion. Expenses peaked in 2014 at $390 billion. Net rent expenses are also expected to drop in 2016 by almost $20 billion, or 1.6 percent.

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While farm income is expected to continue its decline, total median farm household income - which also takes into account off-farm income - is expected to rise slightly, by less than 1 percent.

The forecast is the last for 2016. Final data for the year is expected to arrive at some point in 2017, which will give economists a more definitive farm income picture for 2016. ERS will unveil 2017 farm income estimates early next year.

 In a statement, Ag Secretary Tom Vilsack focused on what he felt like were positives from the report such as the healthy household income figure and low debt to asset and equity ratios. He said the report shows “that the health of the overall farm economy is strong in the face of challenging markets” and pointed out that the current five-year period for farm income is still the highest on record.

In a separate report, ERS and USDA's Foreign Agricultural Service projected 2017 agricultural exports at $134 billion, a $1 billion increase from August estimates.
Half of the increase - $500 million - comes from increased dairy estimates, and grain and fees exports are expected to jump about $300 million.

Agricultural imports for 2017 are projected at $112.5 billion, a $1 billion drop from the August forecast. If the projections are realized, U.S. agriculture would observe a $21.5 billion trade surplus, an increase of almost $5 billion from 2016. However, that would still represent a decline of $4 billion from 2015 and a drop of $21.6 billion from 2014. 

(Story updated at 4:40 ET) 

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