Farm sector profitability is forecast to decline for the second straight year. Net cash income is forecast at $100.3 billion, down about 21 percent from 2014 levels. Lower crop and livestock receipts are the main drivers of the change in 2015 net cash farm income from 2014, while cash production expenses are projected down by 1.1 percent.
Net farm income is forecast to be $58.3 billion in 2015, down 36 percent from 2014’s estimate of $91.1 billion. The 2015 forecast for net farm income would be the lowest since 2006 (since 2002 in inflation-adjusted terms) and a drop of nearly 53 percent from the record high of $123.7 billion in 2013.
As a measure of profitability, net cash farm income is generally less variable over time than the broader net farm income measure. One explanation is that it is possible to exercise greater control on the timing of cash receipts and expenses and thereby moderate large swings from year to year.
Crop receipts for 2015 are expected to decrease by $12.9 billion (6.2 percent) in 2015, led by a projected $7.1-billion decline in corn receipts, $3.4 billion in soybean receipts, and $1.6 billion in wheat receipts compared to 2014. Livestock receipts are forecast to decrease by $19.4 billion (9.1 percent) in 2015 largely due to lower milk and hog prices. Government payments are projected to rise 16 percent ($1.6 billion) to $11.4 billion in 2015. Total production expenses are forecast to decrease by $1.5 billion (less than 0.5 percent) in 2015.
Farm asset values are forecast to decline by 3.5 percent compared to 2014, and farm debt is forecast to increase by 5.8 percent. The farm sector equity measure combines both of these, and is down by $123.9 billion, or 4.8 percent compared to 2014.
The primary driver of the drop in asset values is farm real estate, down $49 billion (2.1 percent). Debt is driven by increases in both real estate debt (up 5.3 percent) and nonreal estate debt (up 6.5 percent). While the movements in the balance sheet show an increasingly leveraged farm sector, financial risk ratios remain in acceptable ranges for now.
The median income of farm households has increased steadily over the past 5 years, peaking at an estimated $80,620 in 2014. However, farm household median income is forecast to decrease slightly in 2015, to $79,287. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. The projected median farm income of -$1,504 is lower than the 2014 estimate of -$869.
Most farm households earn all of their income from off-farm sources—median off-farm income is forecast to increase 4 percent in 2015 to $72,494. (Note: Because they are based on unique distributions, median total income will generally not equal the sum of median off-farm and median farm income.)