Editor’s note: The following is a summary of the USDA Economic Research Service Farm Sector Income Forecast released Sept. 4.
Net farm income, a broad measure of profits, is forecast to decrease $9.8 billion (13 percent) from 2017 to $65.7 billion in 2018, after increasing $13.9 billion (22.5 percent) in 2017.
If realized, inflation-adjusted net farm income would be just slightly above its level in 2016, which was its lowest level since 2002. Inflation-adjusted net cash farm income is forecast to decline $14.6 billion (13.8 percent) from 2017 to $91.5 billion, which would be the lowest real-dollar level since 2009.
Net cash farm income encompasses cash receipts from farming as well as farm-related income, including government payments, minus cash expenses. Net farm income is a more comprehensive measure that incorporates noncash items, including changes in inventories, economic depreciation and rental income.
The 2018 forecasts for U.S. farm sector income and finances — including government payments, net farm income, and net cash farm income — do not include payments under the Market Facilitation Program (MFP), announced on July 24 in response to the current trade situation.
Production value to rise
The value of agricultural sector production is the sum of crop and livestock value of production plus farm-related income. The value of U.S. agricultural sector production is expected to rise $4 billion (1 percent) in 2018 to $422.1 billion.
Gains are expected for the value of crop production ($1.1 billion or 0.6 percent), while the value of production for animal and animal products is forecast to remain stable. However, after adjusting for inflation, U.S. agricultural sector production is expected to decline $4.7 billion (1.1 percent).
The value of crop production is the sum of crop cash receipts from crop sales over the calendar year, adjusted for any changes in the value of crop inventories from the beginning to the end of the calendar year. The forecast in 2018 reflects an almost $1.6-billion increase in the value of inventory adjustment, with cash receipts nearly unchanged.
The value of production for animals/animal products is the sum of cash receipts from their sale over the calendar year, adjusted for any changes in the value of their inventories from the beginning to the end of the calendar year. The slight decrease ($75.5 million) forecast in the value of animals/animal product production reflects an expected $0.3-billion decrease in the value of inventory adjustment that more than offsets small increases in cash receipts.
Farm-related income is expected to rise by $3 billion (6 percent) in 2018, with all of its component categories forecast to increase. Total commodity insurance indemnities are forecast to have the largest dollar increase, at $2.2 billion (31 percent). Small increases are expected for forest products sold and machine hire/customwork income earned by operators.
Crop receipts stable
Crop cash receipts are forecast to be $197.8 billion in 2018, a decrease of $0.5 billion (0.3 percent) from 2017.
Corn receipts are expected to decline $0.8 billion (1.8 percent) in 2018, reflecting an expected decline in the quantity of corn sold. Wheat receipts are expected to increase over $0.5 billion (6.3 percent) from 2017 as a predicted decline in quantity sold is more than offset by expected increase in the price of wheat. Soybean receipts in 2018 are expected to dip slightly ($39.1 million or 0.1 percent) as an anticipated price decline more than offsets higher expected quantities sold.
Roughly half of the forecast value for 2018 soybean cash receipts is from 2017-18 crop marketing year production that was sold prior to China raising import tariffs on U.S. soybeans by 25 percentage points. While prices for soybeans are expected to drop in calendar year 2018, overall soybean production quantities are expected to be up slightly in both the 2017-18 and 2018-19 crop marketing years.
Total animal/animal product cash receipts are expected to rise $0.2 billion (0.1 percent) to $176.2 billion in 2018. Declining receipts for milk, turkeys and red meat animals are projected to be offset by higher receipts from poultry/eggs and miscellaneous animals and products.
Milk receipts are expected to decrease $2.8 billion (7.4 percent) in 2018, reflecting an expected price decline that more than offsets increased quantities of milk sold. Cash receipts from cattle and calves are expected to decrease $0.8 billion (1.1 percent) as a forecast increase in quantity sold is more than offset by a forecast price decline. Hog cash receipts are expected to decline $1.6 billion (7.7 percent), reflecting an expected price decline.
Payments and expenses
Direct government farm payments — which include federal government farm program payments paid directly to farmers and ranchers but exclude insurance indemnity payments made by FCIC and USDA loans — are forecast to decline $2 billion (17.4 percent) to $9.5 billion in 2018, as declines in Agriculture Risk Coverage and Price Loss Coverage payments more than offset an expected increase in supplemental and ad hoc assistance and other programs.
Federal Crop Insurance Corporation indemnities — payments made by private insurance companies to farm operators for their insured commodity losses — are forecast to rise by $0.9 billion (17.4 percent), to $6.1 billion, in 2018.