Income Outlook and Financial
Circumstances Vary Among
Farms
Average net cash income for farm
businesses (intermediate and commercial operations,
including nonfamily farms) is projected to be $61,600
in 2009. This would be almost an 11-percent decline
from the 2008 forecast of $68,900. 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 their peaks of the
summer of 2008, crop receipts are expected to decline
by 12 percent for these farms, matching or in some cases
slightly exceeding the forecast reduction in expenses.
The net cash income forecasts range from a 5-percent
reduction for corn farms to a 12-percent increase for
wheat farms. In the case of wheat farms, they had one
of the largest expected 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 were
the heaviest users of fuel and fertilizer, at 46 percent
of total cash expenses. They also had the largest expected
drop in crop receipts at 14 percent. Among crop farms,
both specialty crop producers and farms that specialize
in other field crops (tobacco, sugarcane, sugarbeets,
hay, and others) are forecast to have the largest increases
in average net cash income. For specialty crop farms,
a small increase in crop receipts coupled with a 4-percent
reduction in expenses results in nearly a 22-percent
increase in net cash income. These farms were one of
the few crop producers that experienced a decline in
net cash income in 2008.
2009 has the potential to be a dismal year for many
livestock producers. A combination of record hog supplies
and declining demand in foreign markets has driven
down prices and resulted in lower production. As a
result, livestock receipts on hog farms are forecast
to decline by 18 percent in 2009. Even with some fallback
in feed costs, expenses are forecast to decline by
only 7 percent leaving average farm business net cash
income for hog producers 52 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 6 percent in 2009. The reduction
in expenses, however, is not enough to maintain incomes,
with average net farm business cash income forecast
to fall by 82 percent in 2009. The situation is only
marginally better for beef cattle producers where the
average decline in farm business net cash income is
forecast at 26 percent. Poultry producers are forecast
to have the slightest reduction in receipts and one
of the highest declines in expenses leaving 2009 average
farm business net cash income 7 percent above 2008.
Average farm business net cash income is not expected
to decline throughout the country in 2009, with the
concentration of commodity production responsible for
the varied financial circumstances. The Northern
Crescent,
which is known for dairy production, is forecast to
have the largest decline in average farm business net
cash income at 32 percent. In contrast, average farm
business net cash income is expected to increase by
almost 9 percent in the Mississippi
Portal,
where poultry, cotton and rice, other field crops, and
specialty crops are the primary commodities. The Southern
Seaboard region—where the relatively optimistic
outlook for specialty crop, grain, and poultry farms
offsets the expected losses on hog farms—is also
expected to have higher average net cash income in
2009. Most other regions of the country are expected
to have average net cash income declines of less than
10 percent in 2009, though the Heartland has
a forecast 14-percent decline.
There is considerable variation in projected net cash
income by size of farming operation 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
an 11-percent decline in average net cash income. Intermediate
farms (primary occupation of farming and gross sales
below $250,000) are projected to have the smallest drop
in net cash income from 2008, at 2 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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