WASHINGTON, Aug. 31, 2016 - Farming is expected to be even
less profitable this year than it was in 2015, despite a major increase in
government payments, according to a new report
released Tuesday by USDA’s Economic Research Service.
The agency’s second farm finance estimate for the year
paints an ugly picture. Net farm income for 2016 is now expected to total $71.5
billion. That’s better than the $54.8 billion that the agency predicted in
February, but it’s still a steep drop from the $80.7 billion in 2015 and $92.6
billion in 2014.
It’s also a reason for Congress to do more to help farmers
survive, National Farmers Union President Roger Johnson told Agri-Pulse.
“NFU is gravely concerned with the trend and the expected
prolonged downturn in the farm economy as a whole,” Johnson said. “Family farmers
and ranchers are losing their farms, and beginning farmers and ranchers are
facing impassible hurdles to staying in the industry. Congress needs to act
swiftly when it returns to provide short-term relief while also further
developing long-term solutions to combat these increasingly difficult
conditions.”
Agriculture Secretary Tom Vilsack, however, pointed out the
upside of the report, stressing that new safety net programs in the 2014 farm
bill gave substantial assistance to producers in need.
“Farm bill program payments – including Agriculture Risk
Coverage (ARC), Price Loss Coverage (PLC), and the Margin Protection Program
for Dairy (MPP) – are forecast to increase nearly 25 percent to $13.5 billion
in 2016,” Vilsack
said in a statement. “For producers challenged by weather, disease and
falling prices, we will continue to ensure the availability of a strong safety
net to keep them farming or ranching.”
The cost of production for farmers has dropped significantly
this year, yields and production are up, and government subsidies have
increased, but prices were what hurt the most, said Jim Williamson, an
economist with the Economic Research Service’s Resource and Rural Economics
Division.
With the exception of some small gains for rye, hay, cotton,
sugarcane, sugar beets, potatoes and a couple of other crops, cash receipts –
the cash income farmers get from crop and animal sales – are forecast down for
2016. Cash receipts for this year
for crops, livestock and animal products are now expected to total just $353
billion, a 7 percent drop from $379 billion last year and down from $424
billion in 2014.
Six months ago,
in the ERS’s February forecast, government economists were expecting cash
receipts to be about $368 billion, but new data on commodity prices, planting
and production forced that prediction down by roughly $15 billion.
“The decline
reflects falling commodity prices, an effect only partially offset by an
increase in production,” the report concluded.
“Ask a farmer if
he’s paying too much for inputs and he’ll always tell you yes, but the main
driver for this drop in income is really coming from the revenue side,” said
Bob Young, the chief economist for the American Farm Bureau Federation.
Input costs such
as fuel are lower, though, and that’s helped farmers deal with lower prices,
the ERS report said.
Total expenses
for farmers this year are expected to reach about $349 billion, a roughly 3
percent decrease from $359 billion last year.
“After reaching
record highs exceeding $390 billion in 2014, farm production expenses are
forecast to dip for the second consecutive year in 2016,” the report said. “The
forecast decline in production expenses is predominantly driven by less
spending on livestock/poultry purchases, fertilizer, and fuel, which should
more than offset the increased outlays for hired labor and property taxes (and)
fees.”
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