Net farm income is forecast to be $95.8 billion in 2014, down 26.6% from 2013's forecast of $130.5 billion, the USDA Economic Research Service said Tuesday.
The 2014 forecast would be the lowest since 2010, but would remain $8 billion above the previous 10-year average, USDA says. Contributors to the decline include lower crop cash receipts, and, to a lesser degree, a change in the value of crop inventories and reduced government farm payments.
Lower crop receipts, higher livestock receipts
USDA estimates that crop receipts will decrease more than 12% in 2014, led by a projected $11 billion decline in corn receipts and a $6 billion decline in soybean receipts.
Chief Economist Joe Glauber notes that the projected total value of crop receipts will be $189 billion, down almost $27 billion from 2013.
Livestock receipts, however, are forecast to increase in 2014 largely due to higher milk prices. Pork producers, too, will see a slight increase, USDA says, but the Porcine Epidemic Diarrhea virus remains a source of uncertainty.
"Livestock receipts are up marginally," noted Glauber, "at 183.4 billion. It's the first time in a long time long while that we have seen livestock and crop receipts at around the same magnitude."
The elimination of direct payments under the farm bill, now law, and uncertainty regarding enrollment and payments during 2014 result in a projected 45% decline in government payments, USDA says.
On the other hand, total production expenses are forecast to decline $3.9 billion in 2014, which would be only the second time expenses declined in the last 10 years. That would make total expenses $310 billion, down almost $5 billion from last year, Glauber says.
The rate of growth in farm assets, debt and equity is forecast to slow in 2014 compared to recent years. The slowdown in growth is a result of expected lower net income, higher borrowing costs, and moderation in the growth of farmland values.
"If you look at real estate values, ERS is expecting those to still increase a bit, but not at the levels that we've seen – and recall that we've been seeing real estate values increase by almost 10% for a number of years," Glauber says. "We've already seen federal reserve banks and others showing those land values starting to soften a bit."
As a result of the combined factors, the value of farm assets is expected to rise 2.4% in 2014, while farm sector debt is expected to increase 2.3%.
USDA says this represents a noticeable reduction in the average annual growth in each of these measures compared with the last 10 years. However, the historically low levels of debt relative to assets and equity reaffirm the sector's strong financial position.
Net cash income is forecast at $101.9 billion, down 28.2 billion and almost 22% from the 2013 forecast. Net cash income is projected to decline less than net farm income primarily because it reflects the sale of more than $6 billion in carryover stocks from 2013.
Farm household income forecast
Also Tuesday, USDA released the latest figures on farm household income, finding that projected median total farm household income is expected to remain essentially unchanged in 2013 and 2014.
Given the broad USDA definition of a farm, USDA said, many farms are not profitable even in the best farm income years. With sectorwide net cash farm income forecast to decline in 2013 and 2014, median farm income is expected to decline to -$2,534 in 2014 (down from -$1,453 in 2012).
Most farm households earn all of their income from off-farm sources; median off-farm income is projected to increase by 2.9% in 2013 and 3.5% in 2014, to $62,585.
A new update for farm income and wealth statistics will be released in August. Data are added three times per year.
2014 USDA ERS Forecast for Farm Sector Income
2014 USDA ERS Forecast for Farm Household Income