First U.S. Farm-Income Gain in Four Years Signals Hope of Bottom

August 30, 2017 03:44 PM
Black Earth Farming

U.S. farmer net income is forecast to rise this year for the first time since 2013, suggesting a bottom to an agriculture slump that left profit at half of the peak.

Producers of crops, livestock and dairy products may net $63.4 billion in 2017, up 3.1 percent from a revised $61.51 billion in 2016, the U.S. Department of Agriculture said Wednesday in a report on its website. Much of the increase came from sales of inventory in grain bins and higher revenue from livestock and milk.

“We’re sitting in this spot where we’ve seen things leveled out,” Chad Hart, an agricultural economist at Iowa State University in Ames, said in a telephone interview. “We’re treading water. Things aren’t getting worse, but they’re not getting better. The question is: Is this just a pause before we work our way back up, or are we waiting for the next step down?”

Signs of stability have returned to the farm economy. Farmland values may rise 2.3 percent following the 0.3 percent decline in 2016, USDA data showed. Cash receipts from chicken broilers and hogs were forecast to increase 15 percent with cattle up 5.7 percent, the agency said.

Two key measures of farm health, debt-to-equity and debt-to-asset ratios, will be little changed in 2017. That reflects the strong balance sheets of many farms that have had the same owner for decades, Hart said. 

Grain 'Wild Card'

Younger and more highly leveraged farmers who have been waiting for better times to improve their balance sheets may need to wait longer, he said.

“If you’ve been holding on hoping for a turnaround, you’re just stuck,” he said. “But speaking more hopefully, we’ve touched the bottom.”

Hurricane Harvey, which continues to pummel the Gulf Coast, has damaged cotton and is threatening livestock production in that region. This year’s projected farm income compares with the record $123.8 billion in 2013.

A Bloomberg index of returns on eight agriculture markets has dropped 11 percent this year.

Improving Sentiment

An agriculture index on industry sentiment published by Purdue University and CME Group Inc. climbed in July to the highest since the survey started in October 2015.

The increase in farm income projected by the USDA reflects sentiment in the Purdue survey, David Widmar, an agricultural economist at the university in West Layfayette, Indiana, said in a telephone interview.

Income closer to $72 billion would be a sign of improving farm economy, he said.

The USDA report suggests “we are not losing ground and hit a spot to catch our breath,” Widmar said. “The big wild card is where grain prices go in 2018 to service rising debt levels. ”

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Spell Check

Craigville, IN
8/31/2017 06:54 AM

  “But speaking more hopefully, we’ve touched the bottom.” In the securities investment business, anyone who tells you now is the bottom is either a fool or a charlatan. The only way to recognize a bottom is in hindsight. As for "An agriculture index on industry sentiment published by Purdue University and CME Group Inc", who could possibly doubt such infallible market oracles as that? (sarcasm)

eleva, WI
8/31/2017 08:41 AM

  Net farm income means little because out off that number you still have to pay any principal on long term loans and lets not to forget income taxes. When you subtract that from there number you are probably closer to 0 on actual personal income for the farmer.

Jackson, MS
8/31/2017 09:02 AM

  sale of grain bins up part of income increase! give me a break/why would that contribute to rise in income??


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