Farm Sector Profitability Weakens Considerably in 2015 From Recent 2013 Peak
Washington--Farm sector profitability is forecast to decline for the second straight year. Net cash farm income is forecast at $93 billion, down about 28 percent from 2014 levels. Net farm income is forecast to be $55.9 billion in 2015, down about 38 percent from 2014’s estimate of $90.4 billion. If realized, the 2015 forecast for net farm income would be the lowest since 2002 (in both real and nominal terms) and a drop of 55 percent from the recent high of $123.3 billion in 2013. The smaller change in net cash farm income relative to the broader net farm income measure is to be expected, because producers can exercise greater control on the timing of cash receipts and expenses and thereby moderate large swings from year to year.
Lower crop and livestock receipts are the main drivers of the decline in 2015, while cash production expenses are projected down by 2.3 percent. Crop receipts are expected to decrease by $18.2 billion (8.7 percent) in 2015, led by projected declines of $8.6-billion in corn receipts, $5.7 billion in soybean receipts, and $2.7 billion in wheat receipts, as prices for all three commodities declined. Livestock receipts are forecast to decrease by $25.4 billion (12 percent) in 2015. As with crop receipts, the primary driver is lower commodity prices, in this case for milk, hogs, broilers, and cattle/calves. Government payments are projected to rise $1.0 billion (10.4 percent) to $10.8 billion in 2015.
Farm asset values are forecast to decline by 2.8 percent compared to 2014, and farm debt is forecast to increase by 6.3 percent. The farm sector equity measure combines both of these, and is down by $104.2 billion (4.0 percent) compared to 2014. The primary driver of the drop in asset values is farm real estate, down $36.9 billion (1.6 percent). Debt is driven by increases in both real estate debt (up 6.1 percent) and nonreal estate debt (up 6.5 percent). While the movements in the balance sheet show an increasingly leveraged farm sector, risk measured at the sector level remains low.