The USDA is forecasting a 26.6 percent decrease in U.S. net farm income in 2014, from $130.5 billion in 2013 to $95.8 billion.
The USDA’s Economic Research Service attributes the drop to lower commodity prices, reduced government payments and a change in the value of crop inventories.
The 2014 Farm Income Forecast, released Feb. 11, notes that although the net income forecast is the lowest since 2010, it remains $8 billion higher than the previous 10-year average and the seventh highest since 1973.
Much of the decline is attributed to falling corn and soybean prices. The USDA also estimates that the elimination of direct payments to producers in the 2014 Farm Bill and uncertainty regarding program enrollment will reduce government payments by 45 percent.
Total gross income is forecast to decrease 8 percent to $444 billion. Total expenses are forecast to decrease 1.1 percent to $348 billion.
Net cash income—which does not account for capital consumption, change in inventory and non-money income—is forecast at $101.9 billion, down 21.7 percent from 2013.
Total cash receipts, at $372.8 billion, are expected to be down 6.4 percent.
Crop cash receipts are expected to decrease 12.4 percent to $189.4 billion, with a nearly $11 billion decrease in corn receipts and a more than $6 billion decrease in soybean receipts.
Declines in cash receipts are expected across almost all major crop categories: food grain, feed, oil, fruits and nuts, and vegetables and melons. Price decreases are expected for corn, wheat, soybeans, hay, dry beans, potatoes, peanuts, cotton and fruit.
Livestock cash receipts are expected to increase 0.7 percent to $183.4 billion, with a 7 percent increase in dairy receipts largely due to higher milk prices. Receipts for cattle and calves are expected to remain stable, as price gains offset a decline in beef and veal production. In addition, the value of farm animal inventories is expected to increase.
Production expenses are expected to decline for the first time since 2009, down $3.9 billion from 2013. The main reason for the decline in 2014 is a decline in input costs. Feed expenses are expected to decrease $6.6 billion, down 11 percent. Fertilizer is expected to decrease $3.1 billion, or 12 percent, and net rent to nonoperators is expected to decline $1.7 billion, or 9.6 percent.
Despite the decrease, total production expenses are expected to constitute 78 percent of gross farm income, up from 73 percent in 2013, indicating a return to much tighter margins, ERS reported.
Increases to expenses are expected for: labor, up $1.6 billion, or 4.6 percent; livestock and poultry purchases, up $1.5 billion, or 6.5 percent; total interest, up $1.3 billion, or 7.8 percent; and miscellaneous expenses such as animal health, breeding, contract production and irrigation water, up $1.3 billion, 3.2 percent.
The rate of growth in farm assets, debt and equity are forecast to slow in 2014 as a result of expected lower net income, higher borrowing costs and moderation in farmland values. The value of farm assets is expected to rise 2.4 percent, while farm sector debt is expected to increase 2.3 percent.
The historically low levels of debt relative to assets and equity reaffirm the farm sector’s strong financial position, ERS states.