Outlook for the 213 U.S. Farm Economy Kevin Patrick Farm and Rural Business Branch Resource and Rural Economics Division
Highlights Net farm income in 213 forecast: $128.2 billion Net cash income in 213 forecast: $123.5 billion excludes depreciation, change in inventory values, and nonmoney income Farm financial risk indicators continue at historically low levels.
213 Forecast 213 farm income is forecast based off of 212, which is also a forecast 212 forecast does not account for producer responses to 212 drought In the next forecast (August 213), 212 will become an estimate The February 213 forecast is based on the most recent forecasts of Commodity demand Crop and livestock inventories Acres planted, yields, and production Input use and costs AND is different from the USDA long-term projections that we formulated in December 212 Several factors that will influence 213 outcomes Actual planting decisions Weather (both during planting and throughout the growing season) Farm and fiscal policy
U.S. monetary policies and world economic conditions create an environment for recent growth and volatility in farm income Weak dollar Current exchange rates encourage rise in agricultural exports Increases in oil costs and other input costs Growth in foreign economies standard of living Low interest rates Increased real estate values Production disruptions caused by adverse weather Lead to lower ending stocks Price volatility
foreign currency U. S. dollar 14 12 1 8 6 4 2 Rising U.S. agricultural exports influence net farm income, 29 compared to 212F Exchange rates Canadian dollars Mexican Pesos Chinese Yuan $ billion 2 18 16 14 12 1 8 6 4 2 U.S. agricultural exports Canada Mexico China 12 1 Net farm income 8 $ billion 6 4 2 29 212F
Income measures expected to be at historic levels Net farm income and net cash income, 22-213F Inflation adjusted 1/ $ billion 14 12 1 Net cash income 8 6 4 2 Net farm income 197 1975 198 1985 199 1995 2 25 21 Net farm income $128.2 Net cash income $123.5 1/ The GDP chain-type price index is used to convert the current-dollar statistics to real (inflation adjusted) amounts (25=1). Source: Economic Research Service, USDA. F= forecast.
Expected changes in corn inventories are driving differences between 213F net cash income and net farm income 212F 213F All Crops Cash Receipts 218.9 216.5 Value of Inventory Change -1. 17. Value of Production 28.9 233.4 Corn Cash Receipts 65.4 68.3 Value of Inventory Change -6.4 13.5 Value of Production 59. 81.7 Note: values in $ billions
Receipts for selected crops, 29-213F $ billion 8 7 6 29 21 211 212F 213F 5 4 3 2 1 Corn Soybeans Fruits and nuts Vegetables Wheat Cotton Source: USDA, ERS Note: 212, 213 forecasts
$ billion Receipts for selected livestock products, 29-213F 8 7 6 5 29 21 211 212F 213F 4 3 2 1 Cattle and calves Dairy Broilers Hogs Source: USDA, ERS Note: 212, 213 forecasts
28 Real cash expenses expected to continue rising in 213 Inflation-adjusted 1/ cash expenses, 197-213F 26 24 22 2 18 16 14 12 1 197 1975 198 1985 199 1995 2 25 21 1/ The GDP chain-type price index is used to convert current-dollar amounts to real (inflation adjusted) amounts (25 = 1). Source: USDA, ERS Note: 212, 213 forecasts
Production expenses forecast up over $19 billion led by increased feed and labor expenses Changes in expense items, 212F - 213F 6.3% $ billion 7 212F 213F 6 5 2.1% 3.% 11.9% -1.5% 3.6% 2.5% 1.3% -.4% 1.8% 4 3 2 1 Note: Percent change from 212 to 213 is indicated at the top of each set of bars. Source: USDA, ERS Note: 212, 213 forecasts
$ billion 25 2 Government payments forecast up in slightly 213 to $1.9 billion All other payments 1/ Conservation payments Function of crop price payments 2/ Fixed payments 3/ 15 1 5 22 23 24 25 26 27 28 29 21 211 212F 213F 1/ All other payments include disaster relief payments, tobacco transition payments, and dairy program payments. 2/ Counter-cyclical payments, loan deficiency payments, marketing loan gains, certificate exchange gains, and ACRE payments vary with crop prices. 3/ Production flexibility contract payments and direct payments are fixed by legislation. Source: FSA, NRCS, and CCC Note: 212, 213 forecasts
Real value of assets expected to establish new record in 213 $ trillion 2.5 2 Real farm sector assets and debt 197-213F 1/ 213F Real Assets = $2.343 trillion 1.5 $ billion 35 3 25 2 15 1 5 197 1.5 1975 198 1985 199 Assets Debt 1995 2 25 1/ The GDP chain-type price index is used to convert current-dollar amounts to real (inflation adjusted) amounts (25 = 1). 21 213F Real Debt= $238 billion Source: USDA, ERS Note: 212, 213 forecasts
Percent 3 Debt to asset and debt to equity ratios forecast to continue downward trend in 213 Farm debt ratios, 197-213F 25 2 Debt-to-equity ratio 15 1 Debt-to-asset ratio 11.3 1.2 5 197 1975 198 1985 199 1995 2 25 21 Source: USDA, ERS Note: 212, 213 forecasts
Farm businesses represent almost 919, farms and account for 95 percent of production 1% Farms Production Assets Debt 8% 6% 1,254,256 4% 64,991 2% 277,596 % Rural Residence Intermediate Commercial Small farms whose operators report they are retired or they had a major occupation other than farming. Small farms with sales less than $25, whose operators report farming as their major occupation. Farms with sales greater than $25, and farms organized as nonfamily corporations or cooperatives. Farm Businesses Photo by: Daniel Marti Source: 211 Agricultural Resource Management Survey (ARMS)
Cost increases expected to outpace receipts leading to lower average net cash income for all crop farm businesses in 213 $ thousand 3 25 Average net cash income for crop farm businesses 1/ 29 21 211 212F 213F 2 15 1 5 Cotton and rice Specialty crops Corn Mixed grain Soybeans and peanuts Wheat Other field crops 1/The farm level forecasts are derived from partial budget modeling using the 211 Agricultural Resource Management Survey (ARMS) and parameters from the sector forecasts. The model is static and therefore does not account for changes in crop rotation, weather, and other local production impacts that occurred after the base year. Source: USDA, ARMS Note: 212, 213 forecasts
Average net cash incomes forecast lower in 213 for all livestock farm businesses $ thousand 35 Average net cash income for livestock farm businesses 3 29 21 211 212F 213F 25 2 15 1 5 Hogs Dairy Poultry Beef cattle Source: USDA, ERS Note: 212, 213 forecasts
Net cash incomes forecast up in the Eastern Uplands, Prairie Gateway, Northern Great Plains, and Basin and Range for 213 compared to 29-212F 213 Farm business net cash income forecast compared with 29-212F Fruitful Rim -13.7% Northern Great Plains 28.4% Northern Crescent -2.3% Basin and Range 13.% Prairie Gateway 17.3% Heartland -6.8% Eastern Uplands 26.2% Southern Seaboard 8.5% Fruitful Rim -13.7% Source: ERS partial model based using the 211 Agricultural Resource Management Survey (ARMS) and parameters from the sector forecasts. The model is static and therefore does not account for changes in crop production impacts the occurred after the base year. F = forecast Mississippi Portal -4.9% Fruitful Rim -13.7%
Questions? Check out our website: http://www.ers.usda.gov/topics/farm-economy/farm-sector-incomefinances.aspx Email me: ktpatrick@ers.usda.gov
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Current cropland prices are supported by high farm income and macroeconomic policies Value of production, 23-213F $ billion $/acre US Cropland Values and Capitalized Rents, 23-212 6 1 Capitalized rents: 5% discount rate 5 Cropland values 8 Capitalized rents: 1-year t-note 4 6 4 Feed grains 3 2 2 Oil crops 1 23 25 27 29 211 213F 23 25 27 29 211 Note: Value of production is calculated as cash receipts plus changes in inventory from the previous year Source: ERS Source: NASS; Capitalized rents are calculated as cropland rents divided by a discount rate (for this chart, either 5% or the 1-year treasury note rate).