USDA’s Updated Net Farm Income Projection Could Look Like the 1980s

August 30, 2018 08:23 AM
 
 

As financial pain ripples across agriculture today, it’s a grim reality for some farmers. The U.S. Department of Agriculture’s (USDA) most recent net farm income projection from February pegs income to fall to a 12-year low at $59.5 billion. Last year provided a slight rebound in net farm income, but as trade issues pressure commodity prices, it’s adding to the bleak outlook in 2018.

“It starts to add uncertainty and uncertainty in the commodity markets is translating into lower grain prices, which is lower net farm income,” said David Widmar, co-founder of Ag Economic Insights. “Lower cash receipts and the weight of it are starting to show up.”

USDA is scheduled to give an updated look at net farm income projections on Thursday; the net farm income projections will be released days after the agency revealed how much the tariff relief aid package will pay out to farmers.

The trade aid will help offset some of this [lower net farm income], but the USDA already said export losses are an $11 billion hit to the farm economy,” said Widmar. “We're already in a difficult situation.  $11 billion dollars off the top could put us closer to crisis levels that we last saw in the 1980s.”

Widmar said the question is if USDA will include the tariff aid in its updated outlook, and how much the additional money will help offset lower income projections.

“Historically speaking, we're at a low spot,” said Widmar. “If we just took $11 billion right off the top, we'd be back at those 1980 levels. We had that trade aid to offset it. But again, the ag economy had a lot of development, so we'll see what the USDA says here at the end of the month and they'll give us an update.”

David Kohl is professor emeritus of agricultural and applied economics at Virginia Tech. He said today’s situation already revealed similarities to the 1980s. However, economic hardships are happening more slowly today than what agriculture experienced 30 years ago.

“We've been in a six-year agriculture economic reset,” said Kohl. “In the 1980s it was like a curveball and  dropped off the table and slowly came back after four years. This one I call ‘the grinder.’ It's having a real impact not only on the financial piece, but also the emotions of agriculture producers out there.”

He said it seems like there’s a surprise around every corner when it comes to the ag economic outlook today. For farmers, the surprises have provided more commodity pressure lately, which is pushing profits lower on the farm.

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Comments

 
Spell Check

Fred T
Central, NE
8/31/2018 08:41 AM
 

  As interest rates creep up and tariff driven inflation takes hold, farmers will be worse off than the 80's. This slow burn is much more detrimental than the fall off the cliff crisis of the 80's.

 
 
Kevin
Montfort, WI
8/31/2018 08:52 AM
 

  The only difference is lower interest rates. Hopefully land owners locked in long term rates to buffer against future rate hikes. This wouldn't even be a discussion we're it not for the demand destruction from this administration. If u challenge me to disagree go look at the soybean basis at your local grain terminal. In my area it's $1.15, nearly double from other years. All the neo-cons will argue that the tariff relief payment will solve everything. In reality the .82 first half payment will only make up for the widening basis which will only get wider as harvest progresses. This is what demand destruction looks like. On top of that the growers that are in flooded and drought areas will only get the payment on the reduced bushels they produce. Couldn't use your production history? What a blunder.

 
 
PJ Jahn
Ptown, IL
8/31/2018 10:53 AM
 

  Very well put Kevin, absolutely spot on speaking the truth. Demand destruction by this idiot Trump, and his swamp monster thieves, even in our own domestic markets. Such as in the illegal, law violating, RFS waivers that Trump's own Scott Pruitt issued. Why aren't the farm state republicans screaming that Trump correct this immediately. Poisonous, partisan political spineless cowards!!! Good luck with that, just as the fools who still think China will come crawling back, begging for our soybeans. We should have learned very well from the Vietnam conflict, that the Asian people are very mind strong, and stubborn as hell. Many members of our military paid the ultimate price for that lesson!!!

 
 

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