The U.S. Department of Agriculture forecast that farmers will see more profit this year than it previously predicted as costs declined for feed, fuel and fertilizer.
U.S. farm net income will be $71.5 billion in 2016, the USDA said Tuesday in a report on its website. That’s 30 percent more than the agency’s February estimate, though still 11 percent smaller than 2015’s net income.
Profits have tumbled from their $123.8 billion peak in 2013, when agricultural commodity prices were stoked by rising global demand, a domestic drought that crimped supplies of corn and cattle, and a virus that devastated hog herds. Crop and livestock inventories have recovered since then, creating surpluses that continue to depress prices and reduce revenues.
“We’re in this cycle of record production," said Gary Schnitkey, an agricultural economist at the University of Illinois at Urbana-Champaign. “The only thing that will stop it is a yield drop in a major production area -- Brazil, the U.S., the former Soviet Union. It has to come from somewhere."
U.S. farm expenses will fall to $306.5 billion this year, the USDA said, which would be the first consecutive annual decline since 1986. In February, the agency estimated costs of $324.8 billion.
The USDA on Aug. 12 pegged the country’s 2016 corn and soybean crops at all-time highs, with corn yields also expected to reach a record. Inventories of corn, soybeans and wheat are all expected to rise in the next year, the USDA said.
In three out of four times since 1990 after USDA projected record yields in August, final estimates were higher, Bill Nelson, senior economist at Doane Advisory Services in St. Louis, said in telephone interview.
The U.S. farm debt-to-equity ratio will increase for a fourth straight year, the USDA said.