In an update from the Federal Reserve Bank of Kansas City earlier this month (“Financing of Ag Production Loans Eases Further”), Nathan Kauffman and Ty Kreitman stated that, "Farm debt at commercial banks continued to ease in the second quarter."
The U.S. Department of Agriculture’s Economic Research Service (ERS) indicated on Thursday that, “Net farm income, a broad measure of profits, is forecast to decrease $9.8 billion (13.0 percent) from 2017 to $65.7 billion in 2018, after increasing $13.9 billion (22.5 percent) in 2017. Net cash farm income is forecast to decrease $12.4 billion (12.0 percent) to $91.5 billion.”
“In inflation-adjusted 2018 dollars, net farm income is forecast to decline $11.4 billion (14.8 percent) from 2017 after increasing $13.0 billion (20.3 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.
With respect to farm receipts, ERS explained that, “Crop cash receipts are forecast to be $197.8 billion in 2018, a decrease of $0.5 billion (0.3 percent) from 2017.”
More narrowly, “Corn receipts are expected to decline $0.8 billion (1.8 percent) in 2018, reflecting an expected decline in the quantity of corn sold…[and]…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 2017/2018 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 2017/2018 and 2018/2019 crop marketing years.”
Meanwhile, “Total animal/animal product cash receipts are expected to rise $0.2 billion (0.1 percent) to $176.2 billion in 2018,” ERS said.
While discussing commodity program payments, ERS noted that, “Higher 2017/2018 market prices for most key crops (that generated the majority of past years’ PLC and ARC payments) are expected to reduce 2018 PLC and ARC payments.”
(Note: The ERS forecast does not include payments under the Market Facilitation Program (MFP), announced this week. For additional information on projected MFP payments, see this farmdoc daily update from Tuesday, “Market Facilitation Program: Impacts and Initial Analysis.”)
In addition, conservation payments “are expected to exceed $3.9 billion in 2018, up 2.9 percent from 2017.”
With respect to crop insurance, ERS stated, “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. FCIC premiums paid are expected to decline by $0.2 billion (5.6 percent).”
In a look at production costs, Thursday’s update pointed out that, ” In 2018, production expenses are forecast at $365.9 billion, up 3.3 percent ($11.8 billion) from 2017 with most categories of expenses projected to increase.”
Thursday’s update also provided a perspective on farm household income, and stated that, “Median farm income earned by farm households is estimated at -$800 in 2017 and is forecast to decline to -$1,691 in 2018.”
“In recent years, slightly more than half of farm households have had negative farm income each year. Most of these households earn positive off-farm income—and median off-farm income is forecast to increase 2.8 percent from $67,500 in 2017 to $69,392 in 2018.”