Note: The data tables referenced on this page are all available in the ERS data product, Farm Income and Wealth Statistics.
Net Farm Income Forecast To Fall in 2014
Net farm income is forecast to be $95.8 billion in 2014, down 26.6 percent from 2013’s forecast of $130.5 billion. The 2014 forecast would be the lowest since 2010, but would remain $8 billion above the previous 10-year average. After adjusting for inflation, 2013’s net farm income is expected to be the highest since 1973. In comparison, the 2014 net farm income forecast would be the seventh highest. Net cash income is forecast at $101.9 billion, down almost 22 percent from the 2013 forecast (see table on farm income indicators ). Net cash income is projected to decline less than net farm income primarily because it reflects the sale of more than $6 billion in carryover stocks from 2013. Net farm income reflects only the earnings from production that occurred in the current year.
- The projected $3.9-billion (1.1 percent) decrease in total production expenses in 2014 would be only the second time expenses declined in the last 10 years.
- Livestock receipts are expected to increase 0.7 percent in 2014, largely due to a 7-percent increase in dairy receipts.
- Crop receipts are expected to decrease more than 12 percent in 2014, with an almost $11-billion decline in corn receipts and a decline in soybean receipts of more than $6 billion.
- The elimination of direct payments under the Agricultural Act of 2014 and uncertainty regarding enrollment and payments during calendar-year 2014 result in a projected 45-percent decline in government payments.
- Farm equity is projected to reach another nominal record, despite the substantial slowdown in asset growth and the expectation of higher debt levels.
- Farm financial risk indicators are expected to continue at historically low levels.
Falling Crop Prices Expected in 2014
The value of crop production is expected to decline substantially in 2014, falling back to pre-2011 levels. Commensurate with this drop is an expected decline in both crop cash receipts and the value of crop inventory adjustment. Declines in cash receipts are expected across almost all major crop categories: food grain, feed, oil, fruits/tree nuts, and vegetables/melons. In particular large anticipated declines in the 2014 price of corn are impacting farm operator decisions regarding a number of their major crops. Cash receipts for livestock and products is forecast to increase slightly, reflecting higher milk prices. In addition, the value of farm animal inventories is expected to increase.
Large U.S. corn production increases are expected as U.S. farm operations continue bouncing back from the 2012 drought. Both sales receipts and value of inventory change for corn in 2014 are expected to decline significantly, reflecting a large forecast decline in the average price of corn for grain. The world corn market has become much more competitive. Use of corn for ethanol is expected to rise. Hay receipts are expected to increase reflecting increased production, but a decline in the annual price of hay is expected to result in a small decline in hay’s overall value of production in 2014.
U.S. wheat’s annual price is expected to decline significantly in 2014, reflecting a large world crop and significant declines in competing feed grain (particularly corn) prices, reducing domestic demand for feed wheat. Wheat receipts and value of production are expected to decline significantly in calendar-year 2014. Rice receipts and value of production are expected to increase, reflecting a predicted increase in price.
Soybean receipts and value of production are expected to decline significantly, reflecting a large expected decline (19.3 percent) in the annual price. The soybean-to-corn calendar-year price ratio is predicted to rise from 2.4 in 2013 to 2.7 in 2014. The 2014 calendar-year price of soybean meal is expected to decline about 15 percent. Peanut receipts are expected to continue their decline from the 2012 record crop amid falling peanut prices and quantities sold.
U.S. cotton farmers face a world market dominated by large stocks as world production has exceeded use for the last several years. Production of relatively cheap polyester, a cotton substitute, has helped depress cotton prices. Marketing decisions by China regarding its large stocks add to the price risk faced by U.S. cotton producers, who are expected to significantly increase production in 2014, increasing receipts and inventories for both cotton seed and lint, despite anticipated price declines in both.
Cash receipts for vegetables and melons are expected to decline in 2014. The return to trend after a banner 2013 mostly reflects a decline in the vegetable annual price index from its 2013 spike. Declines are also expected in receipts for dry beans and potatoes, both of which are predicted to experience falls in their annual price and quantities sold. Cash receipts from the sale of fruits and nuts are expected to decline in 2014, reflecting a forecast double-digit decline in the all fruit price index. Declines in quantities sold are expected for grapefruit, lemons, and oranges.
Dairy Receipts Expected To Increase in 2014
Increased dairy receipts are expected to more than offset forecast declines in hog and egg receipts in 2014. Predicted milk receipts benefit from increased dairy cattle numbers, milk per cow, and price. Production of pork is expected to increase slightly, reflecting producers’ farrowing intentions in the first half of 2014 and higher expected slaughter rates. The predicted lower hog receipts reflect a lower expected hog annual price. Porcine Epidemic Diarrhea (PED) remains a significant source of production uncertainty. While more eggs are expected to be sold in 2014, reflecting higher production and lower poultry feed costs, ERS anticipates eggs will be sold at a lower price than in 2013.
Receipts for cattle and receipts for calves are expected to remain stable in 2014 as price gains offset a decline in beef and veal production. For broilers, higher stock levels at the beginning of 2014 and higher production is expected during the year. Combined with the impact of higher beef prices on demand for broiler products, these factors indicate a lower predicted annual broiler price. Higher turkey receipts reflect higher anticipated price and production. Expectations of increased turkey production reflect lower expected feed costs. However, lower cost broiler products and their ability to substitute for turkey products will affect export markets for both. Beef and veal export quantities are expected to decline in 2014. Export quantities of pork, broilers, and turkeys are each expected to increase.
Production Expenses Expected To Decline Moderately in 2014
Production expenses in 2014 are expected to drop for the first time since 2009. However, their forecast $3.9-billion decrease from the revised 2013 forecast of production expenses is considerably less than 2009’s $11.0-billion drop. They remain well above nominal 2012 production expenses, and are expected to be the second highest on record nominally and the third highest in inflation-adjusted dollars. If realized, this would interrupt the rapid upward movement in expenses that has occurred since 2002. Between 2002 and their peak in 2013, nominal production expenses increased 84 percent. The principal reason for the slowdown in 2014 is a decline in input prices, as exemplified by the Production Items, Interest, Taxes, and Wage Rates (PITW) index, which is forecast to decline 0.5 percent during 2014. Despite the decrease, total production expenses are expected to constitute 78 percent of gross farm income in 2014, up from 73 percent in 2013, indicating a return to much tighter margins.
Feed expenses are expected to decrease $6.6 billion (11.3 percent) in 2014; fertilizer, $3.1 billion (12.0 percent); and net rent to nonoperators, $1.7 billion (9.6 percent). Not all expenses are expected to decline in 2014. Total labor expenses are expected to increase $1.6 billion (4.6 percent); livestock and poultry purchases, $1.5 billion (6.5 percent); total interest, 1.3 billion (7.8 percent); and miscellaneous expenses (which include items like animal health and breeding expenses, contract production fees, irrigation water, and general production and management expenses), $1.3 billion (3.2 percent).
The two major livestock-related expenses—feed and livestock/poultry purchases—are expected to move in opposite directions, but to fall a combined $5.1 billion (6.1 percent). The expected decrease in feed expenses and the increase in livestock and poultry purchases are both price-driven. The annual average feed prices-paid index is forecast to fall 11.8 percent, reflecting expected declines in the price of every feed grain and soybeans. Livestock and poultry purchases are being driven by a an expected double-digit increase in the price for feeder steers as a result of the reduced inventory of cattle, and increased demand for cattle as a result of lower feed prices and strong demand for beef.
The three major crop-related expenses—seeds, fertilizer, and pesticides—are expected to drop a combined $2.9 billion (4.7 percent). The driving force in the decline is the 12.4-percent fall in the annual average prices paid index for fertilizer. USDA’s Agricultural Marketing Service recently reported prices for major fertilizers that are well below 2013 prices. The 2014 forecast of the number of planted acres is almost exactly the same as in 2013. Despite a predicted drop of 3.7 percent in the Refiner Acquisition Cost, fuel expenses are forecast to rise marginally.
These expenses, plus electricity, are the components of farm-origin and manufactured input expenses, which form the bulk of material input operating expenses. Combined, farm-origin and manufactured input expenses are expected to constitute 46 percent of total expenses in 2014, after peaking at 49 percent of total expenses in 2012. These expenses are up from a 40-percent share of total expenses in 2002, having risen 105 percent over this timespan, compared with a 61-percent rise in interest and other operating and overhead expenses.
Payments to Stakeholders Expected To Rise Moderately in 2014
Net value added is distributed among stakeholders and equity owners. Stakeholders provide the hired labor, leased capital, and rental land used in agricultural production. Since stakeholders do not own what is produced, they do not share in the risks involved in producing highly variable agricultural output. Subsequently, the payments that stakeholders receive are more stable over time than net returns to the owners of agricultural production. Payments to stakeholders can move in a different direction than net value added, as occurred in 2009 and 2011 and is predicted to occur in 2014. The expected difference in the direction of change is dramatic in 2014, as payments to stakeholders are forecast to rise by $1.1 billion (1.7 percent) while net value added is forecast to fall $33.6 billion (17.3 percent). If these changes occur, payments to stakeholders will comprise 40 percent of net value added in 2014, up from 33 percent in 2013.
Employee compensation (hired labor) is expected to increase $1.5 billion (5.0 percent) in 2014. Since declining in 2011, hired labor expenses will have risen 39 percent. Total labor expenses (including contract labor) are expected to climb $1.6 billion (4.6 percent) in 2014 due to a predicted 2.3-percent increase in wage rates and a 2.2-percent rise in total output. Despite stable production of vegetables and fruits/nuts (which rely on contract labor intensively), contract labor in 2013 will rise slightly. Output on greenhouse/nursery and dairy farms—farms that typically employ a large share of the sector’s hired laborers—will likely be up 4 percent. The increase in the production of feed grains and oilseeds may also prompt greater use of hired labor in 2014 than in 2013, but increased labor demand will be constrained by falling prices for these crops.
Net rent to nonoperator landlords is forecast to fall $1.7 billion (9.6 percent) in 2014, following a 38-percent increase over the previous 2 years. Cash rent is forecast up 2.2 percent, the result of a relatively small increase in land values and stable planted acreage. Share rent is forecast down 15 percent, the same as the decrease in the value of crop production. Government payments and crop insurance indemnities received by landlords are a consistent proportion of sectorwide payments and indemnities. Government payments to landlords and crop insurance indemnities received by landlords are expected to be 82 percent and 35 percent lower in 2014, respectively.
Total interest expenses are forecast to increase 7.8 percent in 2014 as nonreal estate interest expenses climb 5.4 percent and real estate interest expenses increase 9.3 percent. Debt and interest rates are discussed in the Assets, Debt, and Wealth section.
Government Payments Forecast To Decline in 2014
Government payments paid directly to producers are expected to total $6.12 billion in 2014, representing a 45.4-percent decrease from 2013 (see table on government payments). Under the provisions of the Agricultural Act of 2014 (see details on the ERS Farm Bill Resources page), cotton producers are eligible to receive fixed transition payments for crop years 2014 and 2015 as they transition into coverage authorized by the new Stacked Income Protection Plan (STAX). Fixed by legislation, these cotton transition payments are forecast to be $577 million in 2014.
Based on 2013 crop-year revenue losses mostly for corn, farmers are currently expected to receive $190 million in Average Crop Revenue Election (ACRE) revenue payments in 2014. Producers will receive the first payments from the newly authorized Price Loss Coverage Program and Average Risk Coverage Program in calendar-year 2015.
In 2014, the Tobacco Transition Payment Program is expected to make its final payments of $641 million to tobacco producers and quota holders, after which the program expires.
Supplemental and ad hoc disaster assistance payments are forecast to be $1.02 billion in 2014, a decrease of 47.6 percent from 2013 levels. Under the provisions of the 2014 Agricultural Act, livestock producers are entitled to receive payments under the Livestock Forage Program and Livestock Indemnity Program retroactive to fiscal-year 2012. Payments under these two programs are expected to amount to a combined $810 million in 2014 and are for multiple fiscal years, mostly covering losses (feed expenses) incurred during the 2012 drought. Payments under the Noninsured Disaster Assistance Program (NAP) to livestock and specialty crop producers for which no Federal insurance programs are available are forecast to be $150 million in 2014.
2013 Farm Income Forecasts: November Versus February
USDA’s February 2014 forecast for 2013 shows a small (-$0.5 billion) downward revision in net farm income from the November 2013 forecast. The change in the forecast for 2013 net cash income is similarly small ($0.4 billion) but positive, as cash expenses were revised downward by a larger amount than the downward revision to gross cash income. Net cash income excludes noncash items included in net farm income, such as value of inventory adjustment, gross imputed rental income, nonmonetary compensation of hired labor, and capital consumption.
February’s downward revision in the forecast for 2013 crop receipts is a little larger than the upward revision for livestock. Fruit and tree nut receipts were the only category adjusted by more than $1 billion, due entirely to an upward revision in the price index. Two production expense categories—feed purchased and capital consumption—were revised by more than $1 billion, in offsetting directions.