WASHINGTON, Oct. 3, 2016 - Net farm income is likely to be flat next year despite an increase in government payments but should improve somewhat in the following two years, according to a new analysis. 

The report by the University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI) projects that net farm income will fall by more than $10 billion this year to $69.6 billion despite falling production costs and rise only slightly to $70.3 billion in 2017. 

Farm earnings are expected to rise to $73.7 billion in 2018 and $74 billion in 2019 “because of a modest recovery in crop prices and cash receipts,” the report says. 

FAPRI projects that farmers will receive $13.4 billion in government payments this year, up from $10.8 billion in 2015. The economists see even higher payments in 2017 at $14.4 billion before they drop to a projected $9.9 billion the following year. 

Much of the increase this year and in 2017 is due to payments under the Agriculture Risk Coverage program, which is tied to a moving average of average crop revenue. Payments under the program are expected to drop sharply because of the prolonged slump in prices for corn and other commodities. 

ARC payments are expected to peak at $6.4 billion for the 2015 crop marketing year before dropping to $5.8 billion for 2016 and $2.2 billion for 2017. ARC payments for 2015 are being made this month. 

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The report projects that debt-to-asset ratios will rise from 12 percent last year to 14 percent in 2019 because of slipping land values. Cropland rental rates and average farm real estate values have declined this year, according to USDA data cited by the report.

FAPRI’s latest forecast for net farm income is actually $15 billion higher than its March estimate largely because of historical data revisions. USDA reduced its estimates of 2015 production expenses by more than $21 billion, with reduced capital consumption accounting for nearly half the difference, according to FAPRI.


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