Average Farm Business Net Cash Income Forecast To Decline in 2014
- Average net cash income for farm businesses is expected to decline 21 percent in 2014, but should remain above 2010’s average income.
- Farm businesses that specialize in dairy are forecast to experience a 28-percent increase in average net cash income in 2014, while those specializing in poultry are forecast to see a 4-percent increase. These increases are due to strong milk prices and decreasing feed costs.
- All other farm business specializations are forecast to experience declines in average net cash income, with larger declines for crop than livestock farms.
- Farm businesses are benefiting from declines in some major expense categories, but this advantage is more than offset by declining commodity receipts for most production specializations.
Average net cash farm income (NCFI) is forecast at $81,200 for all farm businesses* in 2014, a decline of more than 21 percent from 2013, after several years of increasing income (see table ). This decline is in line with the sectorwide forecast for NCFI, which represents the amount of cash available to service debt, pay family living expenses, and make investments. It is not a comprehensive measure of profitability, however, since it does not account for changes in inventory, accounts payable, accounts receivable, and depreciation.
Many program crops are forecast to experience increased production and lower prices. As a result, farm businesses specializing in crops eligible for farm commodity program payments are forecast to experience an average 37- to 47-percent decline in NCFI in 2014. Crop receipts are forecast to decline 14 to 16 percent on average in 2014, except for farm businesses specializing in cotton or rice, which are expected to experience a 7.5-percent decline in total crop receipts.
Cash expenses—forecast to decrease 1 to 2 percent, on average, for farm businesses specializing in program crops in 2014—are expected to have a smaller impact on net cash income than declining receipts. Rent expenses are expected to increase by 2 percent. However, some major expense categories are expected to decline or only increase marginally. Seed; fertilizer, lime, chemicals; and fuel together make up around half of all cash expenses for farm businesses specializing in program crops. While seed expenses are forecast up 1.5 percent and fuel expenses are forecast up 1 percent, fertilizer/lime/chemical expenses are forecast down 12 percent.
Specialty crop farm businesses (fruits, vegetables, and nursery/greenhouse) are forecast to experience a decrease in average NCFI of 24 percent in 2014, after annual increases from 2011 to 2013. Crop receipts are expected to decrease more than 7 percent in 2014, largely due to fruit and vegetable prices declining after increases in 2011-13. Labor expenses, which make up 42 percent of all cash expenses for specialty crop farms, are forecast to increase 4.5 percent due to increasing wages and output. Total cash expenses are forecast to increase by 1.3 percent.
NCFI forecasts vary for farm businesses specializing in livestock production, but outcomes are generally better than for farm businesses specializing in crop production. After several years of increasing feed or total expenses, livestock farm businesses across all specializations are expected to benefit from a decline in feed costs of over 11 percent. Feed expenses make up 45 percent of expenses for dairy, 32 percent for hogs, 27 percent for poultry, and 18 percent for beef cattle farm businesses, on average.
Dairy farm businesses are forecast to experience a 28-percent increase in average NCFI in 2014, with milk prices expected to be 5 percent higher than in 2013 and substantial declines in feed expenses. Despite lower output from beef cattle farm businesses due to reduced herd size, higher prices for cattle and calves are expected to result in marginally higher beef cattle receipts. With production cost decreases of less than 1 percent and declining crop receipts, average NCFI for beef cattle farm businesses is expected to decline 9 percent in 2014. With hog prices projected to decrease along with crop receipts, NCFI for hog farm businesses is projected to decrease 11 percent in 2014. Crop receipts make up 10 percent of gross cash income for beef cattle farm businesses and 16 percent for hog farm businesses, and large declines crop receipts are impacting NCFI for both. Despite a slight decline in receipts, average NCFI for poultry and egg farm businesses is forecast up over 4 percent from 2013 due to declining expenses.
Although average NCFI is forecast to decline in 2014 for almost all specializations, regional performance is expected to vary considerably in 2014. Differences in average farm business performance across regions (see more on the ERS resource regions) are largely driven by production specialization.
- Farm businesses in the Basin and Range are forecast to experience a 21-percent decline in average NCFI, largely due to the performance of cattle and wheat farm businesses. The expected decline in cattle farm NCFI is also contributing to an expected 23-percent decline in average net cash income for farm businesses in the Prairie Gateway.
- Expected NCFI declines for mixed grain, wheat, and corn businesses contribute to the expected 31-percent decrease in average NCFI for farm businesses in the Northern Great Plains.
- Substantial declines forecast in average cotton and rice NCFI, along with declines in soybean, peanut, and mixed grain NCFI, are contributing to the expected 30-percent decline in average NCFI for farm businesses in the Mississippi Portal.
- Expected NCFI declines for corn farm businesses contribute to the expected 31-percent decrease in average NCFI for Heartland farm businesses.
- Expected gains in poultry are driving the lower projected declines in average NCFI in the Eastern Uplands (-9 percent) and Southern Seaboard (-16 percent).
- The forecast increase in dairy NCFI is contributing to relatively low declines in average NCFI in the Northern Crescent (-10 percent) and Fruitful Rim (-12 percent), which is also affected by expected losses in NCFI for specialty crop farms in 2014.
* Farm businesses are defined as operations with gross cash farm income of over $350,000 (labeled "commercial") or smaller operations where farming is reported as the operator's primary occupation (labeled "intermediate"). Approximately 11 percent of U.S. farms are commercial and 33 percent are intermediate. "Residence farms" comprise the remaining 56 percent of operations. These are small farms operated by those whose primary occupation is something other than farming.