Net Farm Income Forecast To Be Down
34.5 Percent in 2009
Net farm income is forecast
to be $57 billion in 2009, down $30 billion (34.5 percent)
from 2008. The 2009 forecast is $6.5
billion below the average of $63.6 billion in net farm
income earned in the previous 10 years. Still, the
$57 billion forecast for 2009 remains the eighth largest
amount of income earned in U.S. farming. The top five
earnings years have been tightly grouped between 2003
and 2008, attesting to the profitability of farming this
decade.
Net cash income, at
$69.8 billion, is forecast down $27.7 billion (28.4
percent) from 2008, and $1.8 billion below its 10-year
average of $71.6 billion. Net cash income is projected
to decline less than net farm income in part because
net cash income reflects the sale of $1.0 billion in
carryover stocks from 2008. Net farm income reflects
only the earnings from production that occurred in the
current year.
Highlights
- After reaching record or near-record levels
in 2008, all three measures of farm sector earnings
are forecast to decline in 2009.
- Net cash income is expected to fall about
28 percent, to a level just below its previous 10-year
average.
- Net value added, at $108.4 billion, is
expected to fall from a record $135.7 billion in
2008, but remain above its 10-year average.
Some of the decline in value of production is offset
by the the drop in expenditures for purchased inputs.
- Net farm income, which was a near-record
$87.1 billion in 2008, is expected to be $6.5 billion
below its 10-year average in 2009 as a result of reduced
net value added and increased payments to stakeholders.
- Total expenses are forecast to decline for the
first time since 2002.
- The 2007 and 2008 increases in farm expenses, at
$34.8 billion and $22.5 billion, were the largest
year-over-year absolute changes on record.
- The $11.9-billion decline in expenses projected for
2009 would still leave farm expenses 4 percent higher
than in 2007.
- The 2009 forecast is for a 13 percent decline
in cash receipts.
- The $42.1-billion decline represents about half
the combined increase of $83 billion that occurred
over 2007 and 2008.
- Crop receipts would be the second highest on
record in 2009, despite a $19.4-billion drop to
$163.6 billion, following gains of more than 20
percent in each of the last 2 years.
- Livestock receipts are expected to decline $22.7 billion
(16.1 percent) in 2009.
- Government payments are forecast to change
little in 2009.
- The projected decline in ad hoc and emergency
assistance payments is offset by increases in Milk
Income Loss and countercyclical payments.
See all Farm
Income data files.
In 2008, the farm sector was whipsawed by highly volatile
domestic and international macroeconomic forces that were
initially favorable to U.S. farmers. Prices of both farm
commodities and farm production inputs spiked in the first
half of the year and then fell in the latter half. The
U.S. farm sector is perhaps more intertwined with the
world economy than ever. Demand arising from both the
growing populations and rising incomes in other countries
has expanded markets for farm commodities and increased
competition for critical production inputs such as fuel,
feed, and fertilizer.
The near-record net farm income in 2008 was driven
by a large increase in the value of crop production
that was only partially offset by rising costs of production
for the farm sector. The value of crop production exceeded
its previous record (set in 2007) by $31.6 billion,
a 21-percent increase.
Prices of major crops (corn, soybeans, wheat) trended
upward in late 2007 and continued doing so in the first
part of 2008 as the remainder of the 2007 harvest was
marketed. These prices declined in the latter months as
the 2008 harvests occurred, but remained high by historic
standards.
Exports were strong as a weak dollar relative to other
currencies made U.S. commodities more competitive in international
markets, and ending-year stocks of many commodities were
low. Commodity prices trended downward late in 2008 as
the national and world economies softened.
In 2009, crop prices have continued to decline and prices
for livestock animals and products have experienced sharp
declines. With economic conditions deteriorating worldwide,
demand for exports has tailed off, with few options available
to expand marketing elsewhere. Sharply declining demand
in 2009 has forced farmers to accept prices that are lower
than were expected earlier in the year when production
plans were made.
d
See monthly prices for crops
and livestock.
See annual prices for commodities.
Corn production
is projected to total about 12.9 billion bushels in 2009,
which would be the second highest on record just below
the 13 billion bushels in 2007. Soybean production
is projected to be about 3.3 billion bushels, which
would be the highest on record.
With abundant production and shrinking demand, crop
prices have been lower in the 2008/09 marketing year,
which includes the 12 months following the 2008 harvest.
With large quantities of most grains and oilseeds available
to market, lower prices have pulled down receipts and
production value from 2008's record levels. The value
of crop production is projected to decline by 10 percent
in 2009.
A substantial reduction in milk prices going into 2009
signaled the same outcome for livestock commodities. Prices
for animals and their products have fallen in 2009 because
of declining exports and a lag in adjusting production
for changing market conditions and expectations. Overall,
the value of livestock production is projected down by
16 percent in 2009.
On the input side, prices are also projected to be
lower than in 2008, particularly for most manufactured
inputs, feed, and services such as repairs or transportation.
Overall, the reduction in gross income will exceed the
reduction in production costs by $30 billion, leaving
all net measures of income and output below the record
or near-record levels established in 2008.
d
While the value of crop production is expected to decline
in 2009, it is still projected to remain $46 billion
above the average value of crop production over the
previous 10 years. The total value of livestock production
is expected to decline by $22.4 billion, led by a $10.9-billion
drop in dairy production and a $7.5-billion decline
in sales of meat animals (cattle, hogs, and sheep).
With some offset from lower farm production costs (most
notably feed, fertilizer, and fuel) projected in 2009,
farm net value added is forecast to be down $27.3 billion
(20 percent).
d
Feed costs are a large component of livestock expenses,
and the exceptionally high prices for feed crops in 2008
were pinching livestock producers. Rising costs cause
livestock producers to eliminate their least productive
animals and cut back in less profitable areas of their
operations. However, in 2009, softening world economies
resulted in lower demand for the better cuts of meat,
resulting in declining revenues that more than offset
declining feed costs.
Net value added and net farm income have followed the
value of commodity production over both the long term
and in year-to-year fluctuations. Because farmers typically
do not vary their production mix dramatically from year
to year, purchases of production inputs have been relatively
stable. Thus, the direction and magnitude of annual changes
in the value of livestock production have arisen primarily
from market prices for livestock and livestock products.
On the other hand, variability in the value of crop production
is determined by both market prices and production levels.
Crop production varies with changes in yields due to weather,
plant disease, and pests.
d
See our glossary for
definitions of terms.
See the official
USDA estimates and forecast tables.
d
d
d
Farm Cash Receipts Expected To Decline 13 Percent in
2009
Double-digit declines in calendar-year cash receipts
for both crops and livestock are expected by the
end of 2009. These declines are mostly due to large declines
in prices received by farm operators. While quantities
sold are up or down depending on the particular crop,
declines are expected for all the major livestock categories.
For crops, large declines in cash receipts are
expected for food grains, feed crops, fruit and tree
nuts, and cotton in 2009. Slight increases are expected
for oil crops, vegetables, and melons.
The price of corn is expected to drop $1 per
bushel from 2008 to 2009. Corn
is estimated to account for 92 percent of feed and residual
use in the 2009 feedgrain harvest. Anticipated declines
in feed crops reflect milk producers selling dairy cows
in the hope of cutting milk production and increasing
milk prices.
Wheat's 2009 price is expected to decline
over $2.50 per bushel from 2008. All wheat production
in 2009 is down almost 279 million bushels from 2008
as all-wheat harvested area is down 5.6 million acres
and the all-wheat yield is down about 0.5 bushel per
acre from 2008’s record. Domestic use for wheat
is projected down from last year as less feed and residual
use more than offsets higher food use. Total projected
exports are down as higher than expected wheat production
in the main wheat-exporting countries and aggressive
export promotion by the Canadian Wheat Board has reduced
U.S. market share.
The 2009 calendar-year price for cotton lint is expected
to decline about 12 cents per pound from 2008. The 2009
U.S. cotton crop is expected to be nearly 1.4 percent
above last year, while global cotton production is forecast
down 3.5 percent. Reductions in foreign cotton production
and an expected slight increase in foreign consumption
could benefit U.S. cotton exports. However,
near-record foreign cotton stocks at the end of 2008
may moderate export demand for U.S. cotton.
Fruit and tree nut receipts are expected to decline
in 2009 as their overall price index is expected to drop
7.5 percent. Large percentage increases in quantities
sold are expected for pecans,
sweet cherries, and lemons in 2009. Export volume for
U.S. cherries was up almost 40 percent in the first half
of 2009 compared to the same period in 2008, a result
of sharply lower cherry prices and large supplies of
a very good quality. The forecast for 2009 U.S. sweet
cherry production, if realized, would be up 52 percent
from 2008, the largest on record. Supply increases from
larger domestic crops of lemons are depressing lemon
prices.
The largest percentage declines in 2009 quantities
sold are expected for grapefruit and almonds. The current
forecast for U.S. grapefruit production is below the
2008 crop.
Crop size was smaller in each of the producing States,
and demand for fresh grapefruit is weak. Florida’s
total citrus acreage declined 1.3 percent in response
to citrus canker and citrus greening diseases. A stronger
dollar and weaker foreign economies have dampened international
demand for U.S. citrus. Weather factors contributed
to a smaller almond crop, which is expected to be 17
percent below 2008, though demand has been strong
in both domestic
and international markets.
Not all crops are expected to experience declines in
receipts. A slight increase in soybean cash receipts
is expected. A price decline of almost 80 cents
per bushel in calendar year 2009 is expected to be more
than offset by a forecast 18.4-percent increase in quantity
sold. Depleted soybean stocks in South America are turning
importers to U.S. suppliers.
Despite an expected decline of almost $1.75 per
cwt in the calendar-year rice price, rice sold is anticipated
up more than 30-percent, resulting in a 7-percent
rise in rice receipts. Supplies are the largest since
2006. Total use of U.S. rice is up almost 2 percent from
2008, with increases projected for both export and
domestic markets.
Declines are expected in receipts for dry beans, with
average receipts about $5 per cwt below 2008. However,
expected increases in other vegetable receipts mean that
2009 total vegetable receipts, which include melons,
are expected to increase almost 3 percent from 2008.
Dairy receipts are expected to decline by almost one-third
in 2009 as milk prices received by dairy farmers are
expected to drop by almost $6 per cwt from 2008.
The U.S. dairy herd has continued to decline through
2009. However, export prospects are improving as demand
has increased in China, North Africa, and the Middle
East. The milk-feed price ratio, a popular
profitability measure in the dairy sector, reached its
lowest level (1.5) in 35 years in May-June 2009.
Double-digit declines in cash receipts are also expected
for red meat animals: cattle and calves, hogs, sheep,
and lambs. Cattle prices are expected to decline about
$8.40 per cwt while the price for calves is expected
to decline about $5.70 per cwt. Consumer demand for
meat is down due to the economic
downturn. Year-to-date, beef exports have declined 4
percent, with double-digit declines in exports to Mexico
and Canada, the largest foreign buyers. Hog prices are
expected to decline about $6.27 per cwt. In 2009, breeding
animal inventories were down more than 3 percent from
2008, likely a producer response to persistent negative
returns beginning in late 2007. Shipments of pork to
all major foreign buyers, except Mexico, are down from
2008.
Next to dairy, turkey receipts are expected to take
the biggest hit among the livestock categories in 2009,
declining almost 20 percent. This sharp decline reflects
an almost 9-percent decline in quantity sold and a
drop in farm prices of more than 8 cents per pound.
A slight decline in broiler receipts is expected as
both price and quantity are predicted down. Quarterly
broiler meat production has been declining since
the third quarter of 2008, reflecting cutbacks
in domestic demand. Broiler exports are forecast down
5 percent from 2008. Egg receipts are expected to decline
in 2009, with price down about
26.5 cents per dozen from 2008. Egg exports were down
in the first half of 2009 in comparison to the first
half of 2008, but are expected higher in the latter half
of 2009.
Production Expenses
Forecast To Realize First Year-Over-Year Decline Since
2002
Following an increase of $22.5 billion (8.4 percent)
in 2008 to a record-high $290.0 billion,
total expenses are now forecast to decrease $11.9 billion
(4.1 percent) in 2009 to $278.1 billion, the second
highest level ever. This forecast is $2.7 billion
(1.0 percent) lower than the forecast in August, with
10 expenses decreasing $100 million or more, due mostly
to revised price factors.
The drop in total production expenses will be the first
since 2002. Between 2002 and 2008, nominal expenses
rose $99 billion (52 percent), so the reduction projected
for 2009 is especially timely, since gross farm income
is forecast to fall 11 percent. Still, forecast
expenses for 2009 would constitute the largest percentage
of gross farm income, 83 percent, since 1984.
d
Feed, fertilizer, and fuels/oils should each drop
more than $3.5 billion in 2009. Livestock and poultry
purchases is the only other expense category anticipated
to fall more than $1 billion. Two expenses—seeds
and net rent to nonoperator landlords—are forecast
up more than $1 billion. Sizeable reductions in prices
paid for inputs, especially a 30-percent fall in prices
paid for fuels, are the primary cause of declining production
expenses. After rising almost 16 percent in 2008, prices
paid for production inputs, interest, taxes, and wages
(PITW) should drop more than 3 percent in 2009, the first
decrease since 2002, despite an expected increase in
total farm output of 1.2 percent in 2009, as crop output
rises 3.1 percent and livestock output drops 1.6 percent.
After rising $5.0 billion (12 percent) in 2008 and $18.9
billion (67 percent) over the last 3 years, feed expenses
are expected to drop $3.5 billion (7.5 percent) in 2009.
The decrease is due to a combination of a projected
6.0-percent fall in prices paid for feed and a 1.6-percent
decline in livestock output. Prices paid for grains
used as feed are forecast to fall around 22 percent.
Because corn accounts for around 90 percent of feed
grains used for feed and soymeal is the principal oil
crop product used as feed, prices paid for grain feeds
depend mainly on the prices for these commodities. The
forecast 2009 calendar-year average price of corn is
down 22 percent but the annual average price for soybean
meal should finish up 1.5 percent. Prices paid for complete
feeds have risen 3.6 percent since the beginning of
2009. Because complete feeds have the heaviest weight
in calculating average prices paid for all feed, these
persistent prices have kept the prices paid for all feed
from declining further. On the quantity side, the demand
for feed has been less. Both feed and residual use of
corn and domestic disappearance of soybean meal were
down more than 10 percent during the 2008/09 crop year.
The number of grain-consuming animal units for
calendar year 2009 is forecast down 3.2 percent. Cattle-on-feed
are expected to be lower in the first 3 quarters of 2009
than they were in 2008, and
only marginally higher in the fourth. Annual average
net placements will be down slightly and total supply
should decline 2.9 percent. Pork and broiler production
are forecast down 1.3 percent and 3.4 percent respectively.
Milk production is expected to decrease marginally in
2009.
Livestock and poultry purchases are forecast to drop
$1.4 billion (7.7 percent) in 2009. Cattle and
calf purchases account for more than 75 percent of this
expense. Presently, the impact of
the economic downturn, which is suppressing beef
demand and exports, is outweighing the positive
effects of declining feed costs. In January 2009, the
ERS
High Plains Cattle Feeding Simulator showed losses
of more $24/cwt on fed steers marketed during that
month. Due to these negative conditions, the price
of feeder steers in 2009 fell to its lowest level in
December 2008. Starting with fed steers sold in April
2009, lower feed costs and feeder prices put cattle
feedlots in a profitable position for the first time
since May 2007, and they have remained nearly break-even
through September (Livestock,
Dairy, and Poultry Outlook).
In response to
the expected continuance of lower feed costs and a
resultant rise in demand for feeder cattle, prices
for feeders have started climbing and are forecast
to continue rising throughout 2010. In 2009, the price
for feeders was 7-10 percent below the previous year
during the first 3 quarters. In the fourth quarter,
they are 7 percent higher than in the fourth quarter
of 2008. Still, demand for feeder cattle will be dampened
by a couple of factors. Feedlots are
holding cattle to heavier weights, squeezing room
for new feeder cattle, because prices for finished
cattle are rising slowly due to slack
wholesale demand. Also, an unusually large number
of cows continue to be sent to slaughter because of
low milk prices. Because of the glut, prices paid
for milk cow replacements have fallen 35 percent since
December 2008. Lower product demand and lagging exports
have caused the annual average farm price for hogs to
be down 13 percent this year. Prices paid for feeder
pigs soared during the first 4 months of 2009 before
sinking nearly 70 percent by August. They have begun
to recover during the last 2 months but remain at a very
low level. The farm price of broilers was higher than
in 2008 during the first 2 quarters but then fell below
2008 levels in the last 2 quarters. The annual average
broiler price is expected to finish 2.6 percent lower
than in 2008.
After rising $8.5 billion (21 percent) in 2008 to $49.4
billion, the principal crop-related expenses are forecast
to fall $3.8 billion (7.6 percent) to $45.6 billion in
2009. Seed expenses are up significantly but fertilizer
expenses are forecast to decline much more. One indicator
of crop-related expenses, acres planted of the 14 principal
field
crops, is projected to fall 1.6 percent in 2009. Field
crop production is forecast to be 4 percent higher.
Production of fruits and nuts will decrease while production
of vegetables and greenhouse and nursery products will
be up.
Following an increase of $2.5 billion (20 percent) in
2008, seed expenses are forecast to rise another $2.1
million (13.7 percent) in 2009. Seed prices have been
rising rapidly since 1999 because of biotechnology advancements
and the resultant improved yield potential (Crop
Production Cost and Outlook, FAPRI). Since
then, prices paid for seeds have risen 146 percent,
with 64 percent of that rise occurring during the
last 3 years. Prices paid for seeds increased 26.5
percent in 2008 and are expected to rise another 15.5
percent in 2009. In April 2009, hybrid corn seed was
up 31.5 percent over April 2008 and soybean seeds
had risen 24.5 percent.
After rising $4.8 billion (27 percent) in 2008, fertilizer
expenses are forecast to drop $6.2 billion (28 percent)
in 2008. These offsetting changes are due almost
entirely to the roller-coaster movement of prices paid
for fertilizer since December 2006.
d
Fertilizer prices have been rising steadily since 2002.
Through 2008, the annual average prices paid for fertilizers
rose 264 percent. The annual average prices paid for
fertilizers was up 82 percent in 2008 alone. In 2009,
the annual average prices paid for fertilizers are currently
predicted to fall 26.5 percent. Since the expense did
not rise as much as prices paid, fertilizer purchases
must have been down in 2008 and some of the usual purchases
shifted into 2009. After farmers bought the fertilizer
needed during the first half of 2008, they likely curtailed
purchases as prices continued to rise through September.
This tendency was reinforced by the plummet in wholesale
prices during the last 3 months of 2008 combined with
sticky retail prices. Many farmers probably held off
purchasing fertilizer as they waited for retail prices
to come down. The shift in purchases between years was
due to this postponement. This pattern added to fertilizer
expenses in 2009 and limited the drop to less than forecast.
Also, retail prices were still relatively high during
the first half of the year, when operators were forced
to purchase fertilizer. Fertilizer prices in October
had fallen back to the same level in December
2007, when the runup in prices commenced. They will
probably continue to fall at least until the end of
the year. One reason that fertilizer prices have fallen
during 2009 is that the annual average
cost of natural gas, the primary source for nitrogen
fertilizers, is forecast to fall 54 percent in 2009
(Energy Information Administration: Table
2. U.S. Energy Nominal Prices). With more normal
fertilizer prices at the end of the year, farmers will
probably return to their normal purchasing patterns
in the later months of 2009 and purchase fertilizer
for fall operations or prepurchase for use in 2010.
A couple of factors will limit the amount of fertilizer
purchased in 2009, however. One is the drop in acres
planted to principal crops. Also, with respect to total
applications of fertilizer in 2009, multiplying planted
acreage for principal crops by their respective per-acre
application rates results in a slight decrease.
Pesticide expenses are forecast to be up about $400
million (3.4 percent) in 2009. Prices paid for pesticides
should increase 5.0 percent in 2009. Pesticide use in
2009, calculated by multiplying forecast acreage for
principal crops by their respective per-acre application
rates, suggests a slight decrease in quantity applied.
Fuel and oil expenses are forecast to decrease $5.1
billion (32 percent) in 2009. Like fertilizer prices,
prices paid for fuel rose dramatically between 2002
and 2008. During this period, annual average prices
paid for fuel jumped 207 percent and fuel prices registered
6 straight double-digit percentage increases. Prices
paid for fuels have fallen since July 2008, however.
By the end of December 2008, fuel prices stood 31 percent
lower than in December 2007. The annual average prices
paid for fuel should fall around 30 percent in 2009.
Refiner Acquisition Cost (RAC), the average price of
domestic and foreign oil, bottomed out around $40 in
the first quarter of 2009, a drop of 56 percent from
the first quarter of 2008. RAC has been slowly climbing
through the first 3 quarters of 2009 and is projected
to finish the year in the low $70's (Energy Information
Administration: Table
2. U.S. Energy Nominal Prices). This rise in prices
during the latter part of 2009 is significant because
questions about the timing of input purchases on the
2003 Agricultural Resource Management Survey (ARMS)
showed farmers purchasing 50 percent of their fuels
in the third and fourth quarters. The decrease in
planted acreage in 2009 will likely prompt a reduction
in fuel use during the year.
Payments to Stakeholders (Providers of Hired Labor,
Rented Land, and Debt Capital)
Although total expenses are expected to fall in 2009,
Payments to stakeholders are projected to increase around
$2.7 billion (5.6 percent). In 2009, they will constitute
47 percent of net value added, up from 36 percent in 2008.
The ratio of stakeholder payments to total expenses
has been dropping since it reached a peak at 26.5 percent
in 1984. In 2009, the ratio should rise to over 18 percent,
up from 17 percent in 2008.
Following a $900-million (4-percent) rise in 2008, employee
compensation (hired labor) is forecast to be up around
$800 million (3.2 percent) more in 2009. Farm wage rates
are projected to be up 1.8 percent. Fruit and nut, vegetable,
dairy, and greenhouse/nursery operations are the
heaviest users of hired labor. The production of fruits
and nuts is slated to drop 3.0 percent while milk production
falls slightly; vegetable production will likely increase
a little more than 3 percent; greenhouse and nursery
production is expected to be up 1.6 percent.
Net rent to nonoperators is expected to rise $1.2 billion
(13.2 percent) in 2009. The increase would be the result
of a rise of 3.6 percent in cash rent, a fall of 10
percent in share rent, a 3.5-percent increase in landlord
government payments, and a sizeable jump in FCIC payments
to landlords. The rise in cash rent will occur because
cropland rental rates are up 5.3 percent, even though
average land values are down (Agricultural
Land Values and Cash Rents Annual Summary, August
2009) and acres planted to principal crops are down.
The drop in share rent follows the decline in the value
of crop production.
Interest expenses are forecast up almost $700 million
(5 percent) in 2009 as a result of real estate interest
being more than $700 million higher and nonreal estate
interest being nearly the same. Discussion of debt levels
and interest rates are provided in the balance sheet
briefing room.
Government Payments
Forecast at $12.5 Billion
Direct government payments
are expected to total $12.5 billion in 2009, a 2-percent
increase from the $12.2 billion paid out in 2008.
This level would be almost 19 percent below the 5-year
average for 2004-08. Direct payments under
the Direct and Countercyclical Program (DCP) and the
Average Crop Revenue Election Program (ACRE) are forecast
at $5.06 billion for 2009. Direct payment rates are
fixed in legislation and are not affected by the level
of program crop prices. The ACRE program recently
authorized by the Food, Conservation, and Energy Act
of 2008 (2008 Farm Act) provides revenue insurance
to producers in exchange for a 20-percent reduction
in their annual direct payment allotments beginning
with the 2009 crop year. Due to low base acre enrollments
in ACRE for the 2009 crop year, the 20-percent reduction
in advanced direct payments is expected to be minimal.
Countercyclical payments are forecast to increase from
$712 million in 2008 to $1.23 billion in 2009. The lower
cotton prices beginning in the latter half of 2008 are
responsible for this projected increase. Since 2006,
only upland cotton and peanuts have received countercyclical
payments, but only cotton is receiving countercyclical
payments in 2009. Under the Food, Conservation and Energy
Act of 2008 (2008 Farm Act), the timing of countercyclical
payments will change. For the crop years 2008 through
2010, producers will receive two countercyclical payments.
A partial payment will be made after 180 days of the
marketing year and the final payment will be made beginning
the following October 1.
Marketing loan benefits—including loan deficiency
payments, marketing loan gains, and certificate exchange
gains— are projected at $948 million in 2009,
up from $316 million in 2008. In 2009, upland cotton
producers realized almost 91 percent of the total marketing
loan benefits. The other crops receiving marketing
loan benefits are wheat, barley, peanuts, wool, mohair,
and pelts.
The Milk Income Loss Contract Program (MILC) compensates
dairy producers when domestic milk prices fall below a
specified level. High prices in 2008 meant that only small
program overpayments repaid by producers were recorded.
For 2009, current economic uncertainties have reduced
both domestic and export demand for dairy products to
such an extent that lower milk prices are expected to
generate $900 million in MILC payments.
Forecast at $740 million in 2009, Tobacco Transition
Payment Program (TTP) payments are expected to continue
their declining trend. Payments reported here include both CCC payments
and lump-sum payments. Begun in 2005, this program provides
annual payments over a 10-year period to eligible quota
holders and producers of tobacco. Since the inception
of the program, lump-sum payments to individuals have
been made through agreements with third parties in return
for the producers’ and quota owners’ rights
to the 10-year TTP payment stream. While significant
lump-sum payments were made in 2005 and 2006,fewer
producers and quota owners are currently
participating in these
buyout agreements.
Conservation programs include all conservation programs
operated by the Farm
Service Agency (FSA) and the Natural
Resources Conservation Service (NRCS) that provide
direct payments to producers. Estimated conservation payments
of $3.23 billion in 2009 reflect programs being brought
up toward funding levels authorized by current legislation.
Ad hoc and emergency disaster program payments are forecast
to be $325 million in 2009. The Emergency Conservation
Program, the various Crop Disaster programs, the Noninsured
Assistance Program, and the Upland Cotton Assistance
Program are disbursing over 80 percent of this total.
Disaster payments appropriated under Title IX – Agricultural
Assistance - of the U.S. Troop Readiness, Veterans’
Care, Katrina Recovery, and Iraq Accountability Appropriations
Act, 2007, were largely paid out in 2008 – hence
the projected drop in these payments in 2009 by 85
percent from 2008 levels. The 2008 Farm Bill created
a permanent fund for disaster assistance, the Agricultural
Disaster Relief Trust Fund. Payments from this fund
and from the 2009 Recovery Act are expected to amount
to $25 million in 2009.
d
| Farm Income Forecasts
Grow More Refined Over 19 Months The periodic
farm income forecasts and estimates published by
ERS over the course of a crop year (5 over a span
of 19 months) can vary markedly from one release
to the next. For example, the first forecast of
2009 income (in February 2009) undergoes painstaking
refinement as new information becomes available.
Release dates for the updated forecasts correspond
with the availability of seasonal data and annual
survey results. For example, an August 2009 update
of annual crop values benefits from preliminary
output and yield numbers as reported by producers
in the field. Likewise, production expenses can
be extrapolated from prior-year expense data and
several months of current-year input prices. Additional
refinements in November and the following February
(2010) incorporate harvest, sales, and inventory
data. Ultimately, an August 2010 estimate of 2009
farm income will be published.
Individual components of the farm income accounts
adhere to different timetables and are subject to
varying degrees of uncertainty. For instance, crop
inventory adjustment is a residual component of
total supply (production and beginning-of-year stocks)
and use (domestic and exports). Farm household income
is contingent on many factors (amount of off-farm
work hours and wage rates) that transcend crop and
livestock numbers. Government payments—which
are a function of prices, production, eligibility
rules, and ad hoc disaster legislation—are
also hard to forecast with any certainty, and that
uncertainty compounds the margin of error that measures
like net cash income are subject to from first forecast
to final estimate.
Crop and livestock receipt forecasts tighten significantly
as additional price and output data become available
during the forecast period. As a result, by harvest
time, the relative error (between forecast and actual
totals) is generally less than 2 percent for total
cash income and less than 5 percent for net farm
income. Of course, in absolute terms this can amount
to as much as $4 billion across the farm sector.
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See glossary.
See all Farm
Income data files.
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