Income Outlook Deteriorates for Livestock Farms
Average net cash income for farm
businesses (intermediate and commercial operations,
including non-family farms) is forecast to be $61,000
in 2009. This would be almost a 17-percent decline
from the preliminary 2008 estimate of $73,100. The
overall outlook for declining 2009 farm income has
not changed much from the beginning of the year. However,
the projected change in income prospects for farm
businesses will not affect all farm operations in
the same manner or to the same degree. There is considerable
variation in business structure, including the extent
to which assets are owned, the mix of crop and livestock
produced, the contribution of government payments
to gross income, and the relative importance of energy
inputs and borrowed capital to production costs. Several
classifications of farms—including commodities produced
and geographic location—reflect this diversity.
Dramatic reductions in costs for major inputs such as
fuel and fertilizer are expected to offset some of the
impact of lower prices for program crop producers. With
grain prices remaining well below summer 2008 peaks,
crop receipts are expected to decline 11 percent for
grain farms in 2009, matching or slightly exceeding the
forecast reduction in expenses. Forecast changes in net
cash income for farm businesses growing program crops
range from an almost 9-percent reduction for corn farms
to an almost 2-percent increase for wheat farms. Wheat
farms are forecast to have one of the largest reductions
in crop receipts, but also one of the largest declines
in expenses given the relative importance of fuel and
fertilizer (40 percent of total cash expenses). Cotton
and rice producers are the heaviest users of fuel and
fertilizer, at 46 percent of total cash expenses, and
are forecast to have the largest expected drop in crop
receipts at 38 percent.
Specialty crop producers and farms that specialize in
tobacco, sugarcane, sugarbeets, and hay are forecast
to have the largest increases in average farm business
net cash income in 2009. For specialty crop farms, a
small increase in crop receipts coupled with a 4-percent
reduction in expenses results in nearly a 15-percent
increase in average farm business net cash income. Specialty
crop farms are one of the few groups of crop producers
that saw farm business net cash income decline in 2008.
2009 has the potential to be a devastating year for
many livestock producers. A combination of record hog
supplies and declining foreign demand has driven down
hog prices and resulted in lower production. Hog receipts
are forecast to decline by 18 percent in 2009. Even with
lower feed costs, expenses are forecast to decline by
only 6 percent, leaving average farm business net cash
income for hog producers 72 percent below 2008. The situation
for dairy farms is similar. The all-milk price is expected
to drop to nearly $12 per cwt—compared to the 2007
annual average of $19 per cwt. Receipts for milk and
dairy products are forecast to fall by 33 percent in
2009. Dairy expenses, which have risen sharply in the
last several years, are forecast to fall by more than
5 percent in 2009. The reduction in expenses, however,
is not enough to maintain incomes, with average net cash
income for dairy farm businesses forecast to fall by
94 percent in 2009. For beef cattle producers, the average
decline in farm business net cash income is forecast
at 29 percent. Poultry producers are forecast to have
the lowest reduction in receipts and one of the highest
declines in expenses, leaving 2009 average farm business
net cash income only 6 percent below 2008.
Average farm business net cash income is not expected
to decline in all areas of the country in 2009, with
the concentration of commodity production responsible
for the varied financial circumstances. The Northern
Crescent (see
map for regions), which is known for
dairy production, is forecast to have the largest decline
in average farm business net cash income at over 40 percent.
The decline in average farm business net cash income
is forecast at only 3 percent in the Southern Seaboard region
where the relatively optimistic outlook for specialty
crop, grain, and poultry farms offsets the expected losses
on hog farms. Average farm business net cash income is
expected to increase by almost 5 percent in the Mississippi
Portal, where
poultry, cotton, rice, other field crops, and specialty
crops are the primary commodities. For the remainder
of the country, farm businesses are expected to experience
average income declines of 10-20 percent in 2009.
There is considerable variation in projected average
net cash income by size of farm business in 2009. Commercial
operations (sales greater than $250,000), which represent
more than 12 percent of all farms and more than 75 percent
of total agricultural production, are projected to experience
a 16-percent decline in average net cash income. Intermediate
farms (primary occupation of farming and gross sales
between $100,000 and $250,000) are projected to have
the largest drop in average net cash income from 2008,
at 22 percent. About 61 percent of U.S. farms are classified
as rural residences—operators of which typically earn
most of their household income from off-farm sources.
The vast majority of these rural-residence farmers were
employed off-farm prior to becoming a farmer, with a
much larger share of both operators and their spouses
having off-farm jobs. The farm operations of these households
have for many years averaged a negative net cash income,
with 2009 no exception.
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