U.S.farm income down for third year but stabilizing

A continuing decline in crop and livestock prices will pull down U.S. farm income for the third year in a row, but this year’s decline will be a modest 2% or 3%, said a USDA forecast, far milder than the combined 31% plunge of the past two years. Large crop-support payments, estimated at $9.5 billion for ARC, PLC, and LDPs, would buffer a 4% drop in livestock receipts and a 1% fall in crop receipts.

“Cash receipts for corn and soybeans – historically the crops generating the highest cash crop receipts – are both expected to be fairly flat in 2016,” said the USDA in its first farm sector forecast of the year. Market prices for most field crops are forecast to continue to decline, along with prices for hogs, cattle, poultry, milk, and eggs. A 1% decrease in production expenses would provide some cushion.

“With a third straight year of lower commodity prices and income forecast in 2016, farm real-estate values are expected to decline modestly,” said USDA, estimating a decline of 1% in value.

The debt-to-asset ratio would rise to 13.2%, the highest since 13.6% in 2009. The debt-to-asset and debt-to-equity ratios have been on the rise since 2012 but are low by historical standards, said USDA. “As such, the sector appears to remain well insulated from the solvency risk associated with declining commodity prices, adverse weather, changing macro-economic conditions, and the fluctuations in farm asset values.”

UAC Information Center by information agriculture.com