2017 Farm Sector Income Forecast
After 3 consecutive years of decline, net cash income and net farm income are both forecast to rise in 2017 relative to 2016 estimates. Net cash farm income for 2017 is forecast at $100.4 billion, up $11.2 billion (12.6 percent) from 2016. Net farm income, a broader measure of profits, is forecast at $63.4 billion, up $1.9 billion (3.1 percent) relative to 2016. The stronger forecast growth in net cash income is largely due to an additional $9.7 billion in cash receipts from the sale of crop inventories. The net cash farm income measure counts those sales as part of current-year income while the net farm income measure counted the value of those inventories as part of prior-year income.
- Overall, cash receipts are forecast to increase $14.1 billion (4 percent) in 2017, reflecting an 8.4-percent increase in animal/animal product receipts. Most animal and animal product prices are expected to rise while crop prices overall are expected to decline; quantities sold are forecast to increase for both crops and livestock. Thus, rising quantities sold for crops and livestock account for nearly 90 percent of the forecast rise in 2017 cash receipts. In particular, cash receipts for broilers, hogs, and cattle/calves are expected to see strong growth in 2017 after posting significant declines in 2016. Crop cash receipts in total are forecast to remain nearly unchanged from 2016 levels.
- Broiler cash receipts are forecast up $3.9 billion (15 percent), milk up $3.8 billion (11.1 percent), hogs up $2.7 billion (14.6 percent), and cattle/calves up $3.6 billion (5.7 percent). The increase in broiler, milk, and hog receipts reflect anticipated increases in both prices and quantities sold while the increase in cattle/calf receipts reflects anticipated increases in quantities sold that more than offset the slight drop in prices.
- Total crop cash receipts are forecast up $0.5 billion (0.3 percent). However, some crops are forecast to have stronger growth. Soybean cash receipts are forecast up $2.4 billion (6.3 percent), cotton up $1.5 billion (26 percent), and vegetables/melons up $1.3 billion (6.8 percent). Partially offsetting these increases, fruit/nut cash receipts are forecast to decline $4.9 billion (17.2 percent).
- Direct government farm program payments—those made "directly" by the U.S. Government to farmers and ranchers such as Price Loss Coverage, Agricultural Risk Coverage, and conservation program payments—are forecast to decline slightly in 2017. Federal Crop Insurance indemnities, which are payments made by private insurance companies to farm operators for their insured crop losses, are forecast to rise in 2017 by $864 million, or 19.9 percent.
- Total production expenses are forecast to increase $4.6 billion (1.3 percent) in 2017 after falling year-over-year in both 2015 and 2016. Interest expenses are forecast up $2.2 billion (12.8 percent) and hired labor expenses up $1.6 billion (5.7 percent). Expenses for fuels and oils are forecast up by $1.3 billion (10.8 percent) after 2 years of decline. In contrast, expenses for fertilizer are forecast to drop $2.3 billion (9.9 percent) and feed to drop $1.6 billion (2.9 percent).
- Farm sector assets are forecast to increase 4 percent and debt 4.4 percent in 2017 over 2016. Farm sector equity is expected to increase by 3.9 percent, and debt-to-asset levels for the sector are forecast to be essentially unchanged.
- Farm sector assets are forecast to increase $118.3 billion (4.0 percent) largely due to real estate assets, the value of which is forecast to increase $113.5 billion (4.6 percent).
- Farm sector debt is forecast to rise $16.5 billion (4.4 percent), with real estate debt forecast to rise $16.9 billion (7.5 percent) in 2017 after increasing $16.7 billion (8 percent) the previous year. Nonreal estate debt is forecast to be relatively unchanged (down $399 million, or -0.3 percent) from 2016.
Value of Agricultural Sector Production Expected To Rise in 2017
The value of agricultural sector production is composed primarily of crop and livestock cash receipts adjusted for any changes in the value of inventories and home consumption plus farm-related income. (The value of agricultural sector production plus direct government payments less farm sector costs results in net farm income.) The annual value of U.S. agricultural sector production is expected to rise $6.5 billion (1.6 percent) in 2017, as increases expected for the value of animals/animal products and farm-related income more than offset a predicted decrease in the value of crop production (see detail on value of production in the table on value added). If realized, the forecast 2017 value of crop production ($180.5 billion, the lowest total since 2010) would represent a decline of $8.5 billion (4.5 percent) from 2016.
The difference between the change in crop value of production and crop cash receipts (the latter is anticipated to change little in aggregate) is that change in the value of production encompasses an expected $9.7-billion decline in crop inventories and an $8.9-million drop in home consumption, in addition to the $481-million increase in crop cash receipts. The 2017 value of production for U.S. livestock and poultry is forecast to rise $12 billion (7.3 percent) from 2016. Ranchers sold almost $176.5 billion of animals and animal products, consumed an additional $311.4 million on the farm, and placed $671.6 million (value of inventory adjustment) of 2017 production in end-of year-inventories.
The value of agricultural sector production includes other sources of farm-related income in addition to the value of production from crops and animals/animal production. Farm-related income is expected to rise by $3 billion (6.7 percent) in 2017, with nearly all categories forecast to increase relative to 2016. Federal Crop Insurance Corporation (FCIC) indemnities are forecast up $860 million (19.9 percent) in 2017. The net cash rent received by operator landlords is the only major category of farm-related income to remain mostly flat, declining by 0.2 percent.
Total Crop Receipts Expected To Change Little in 2017
Crop cash receipts—the cash income from crop sales during the 2017 calendar year—are forecast to increase just $0.5 billion (0.3 percent) in 2017 as prices continue to decline for many field crops. Corn receipts are expected to decline for the fifth consecutive year. Expected weakening of calendar-year corn prices more than offsets an expected increase in quantity sold, leading 2017 corn cash receipts to fall by over $0.3 billion (0.7 percent) from 2016. Wheat receipts are expected to decline almost $0.3 billion (3.3 percent) from 2016 despite an expected price increase as ERS anticipates a decline in wheat quantities sold. Higher soybean receipts ($2.4 billion or 6.3 percent) in 2017 reflect higher soybean prices and an increase in quantities sold. Rice receipts are forecast to decline slightly in 2017. The expected increase ($1.5 billion or 25.6 percent) in 2017 cotton receipts reflects expected higher prices and quantities sold for long staple (Pima) and increased quantities sold for upland cotton, with only a small price decline.
Vegetable and melon cash receipts are expected to rise $1.3 billion (6.8 percent) in 2017. Dry bean receipts are expected to rise almost 9 percent, reflecting an anticipated rise in quantities sold in 2017. Potato receipts are expected to rise $0.2 billion (6.3 percent), reflecting higher quantities sold at higher prices. Cash receipts for fruits and nuts are expected to decline almost $5 billion (17.2 percent) in 2017, driven primarily by lower expected prices. Sugarcane receipts are expected to rise almost 17 percent in 2017 while receipts for sugar beets are expected to decline 10.5 percent.
Animal/Animal Product Receipts Forecast To Rise Sharply in 2017
Total animal/animal product cash receipts are expected to rise $13.6 billion (8.4 percent) in 2017. Relative to 2016, annual price increases are expected for broilers, farm chickens, chicken eggs, hogs, and milk. Cattle/calf and turkey prices are expected to decline.
Milk receipts are expected to increase $3.8 billion (11.1 percent) in 2017 from 2016, reflecting expected increases in both the price and quantity sold. Cash receipts from cattle and calves are expected to rise in 2017, increasing $3.6 billion (5.7 percent) from 2016 as cattle/calf prices decline slightly but quantities sold rise. Hog prices and quantities sold are both expected to rise in 2017, leading to a forecast increase in hog cash receipts of 14.6 percent.
Poultry and egg cash receipts are expected to increase $3.2 billion (8.4 percent) in 2017, reflecting greater quantities sold at higher prices for most of these products. Broiler receipts are expected to rise $3.9 billion (15 percent) as both prices and quantities sold increase in 2017. Chicken egg receipts are expected to rise $0.3 billion (4.9 percent) as both egg prices and quantities sold increase in 2017. Turkey receipts are expected to decline $1 billion (16 percent) in 2017, reflecting the impact of lower prices with a marginal increase in quantity sold.
Rising Quantities Sold Account for Nearly 90 Percent of the Forecast Increase in Cash Receipts
Total farm cash receipts across all commodities are expected to increase $14.1 billion (4 percent). To better understand the factors underlying the movement in annual receipts, we decompose them into two separate effects: a "price effect" with quantity change held constant (unchanged), and a "quantity effect" with price change held constant. The difference between the total change in cash receipts and the change due to the price and quantity effects is due to changes in receipts for minor commodities (called "other changes"), for which separate price and quantity effects are not calculated.
Price changes (the price effect) from 2016 to 2017 for crops and animals/animal products are expected to account for an almost $1-billion increase in commodity cash receipts— the combined effect of a $7.7-billion increase in animal/animal product receipts offset by a $6.7 billion decline in crop receipts. The quantity effect is expected to increase cash receipts from 2016 to 2017 by $12.6 billion: $5.8 billion from additional quantities sold of animal/animal products and almost $6.9 billion in additional receipts from crops sold. This is expected to be supplemented by a $0.5-billion increase in receipts from sale of other crops and miscellaneous livestock.
Thus, the price and quantity effects are both positive and together contribute to the 4-percent rise in overall commodity receipts. Nonetheless, increased quantities sold are the primary driver, accounting for nearly 90 percent of the total effect on cash receipts.
Direct Government Farm Payments Forecast To Decline Slightly in 2017
Direct government farm program payments are those made "directly" by the U.S. Government to farmers and ranchers without any intermediaries. They include payments from the programs created in the 2014 Farm Bill as well as a few other programs, but do not include FCIC insurance indemnity payments. Direct government farm program payments are forecast to decline by 0.2 percent in 2017 from 2016 (see table on government payments). USDA's Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs are collectively expected to account for almost 65 percent of all direct government payments in 2017. While PLC payments and conservation program payments are expected to increase in 2017, declines are anticipated for ARC payments and other major programs. PLC payments are expected to increase almost $1.6 billion while ARC payments are expected to decline about $1.2 billion.
PLC is a price-based program whereas ARC is a revenue-based program where payments for each covered commodity are based on the number of "base" acres enrolled in the program. Base acres are a farm's crop-specific acreage of wheat, feed grains, rice, oilseeds, pulse crops, or peanuts eligible for FSA program purposes. Base acres do not necessarily align with current plantings. PLC program payments are issued when the effective price for a commodity is less than the reference price for that commodity. Large annual increases in PLC payment rates (and therefore PLC payments) are expected for wheat (from $0.61 to $1.61 per bushel), corn (from $0.09 to $0.34 per bushel), grain sorghum (from $0.64 to $1.20 per bushel), and flaxseed (from $2.33 to $3.28 per bushel). Small increases and payments are forecast for oats, sunflower seed, and rice. Small declines in PLC payment rates and payments are predicted for peanuts and canola. No payments are expected for soybeans in 2017.
ARC payments in 2017 are forecast to decline from 2016, reflecting lower benchmark prices (based on the 5-year Olympic average) expected for both corn and soybeans, the two crops with the most base acres enrolled in the ARC program. Soybean base acres received about 18.5 percent of 2016 ARC-CO (Agricultural Risk Coverage-County) payments while corn base acres received 69 percent. Corn base acres are expected to receive the majority of ARC-CO payments in 2017.
Marketing Loan Benefits (MLBs)—composed of Marketing Loan Gains (MLGs) and Loan Deficiency Payments (LDPs)—are forecast to decrease $194.9 million (94.6 percent) from 2016 due to expected higher prices for upland cotton in 2017.
Conservation payments—reflecting Farm Service Agency (FSA) and Natural Resource Conservation Service (NRCS) financial assistance programs—are expected to increase by $224.6 million in 2017.
Supplemental and Ad Hoc Disaster Assistance payments are forecast to decline $98.8 million (15 percent) in 2017 mostly due to expected declines in the Livestock Forage Program.
The Dairy Margin Protection Program (MPP) is forecast to return $5 million to the Federal Government in 2017, after payments from the program are adjusted by the fees and premiums paid by dairy participants. This reflects the impact of higher milk prices in 2017.
Production Expenses Forecast Higher in 2017
After reaching record highs exceeding $390 billion in 2014, farm sector production expenses declined by more than $40 billion the next 2 years. Following totals of $359 billion in 2015 and $350 billion in 2016, 2017 production expenses are forecast higher at $355 billion. Continued forecast declines in expenses for inputs produced on farms—including feed and seed—are offset by forecast increases in fuel, labor, and interest expenses.
See data tables on production expenses.
- Livestock and poultry purchases are expected to increase for the first time since 2014.
- A forecast double-digit increase (10.8 percent) in spending on fuels and oils, which accounts for less than 5 percent of cash expenses, would reverse the recent trend of lower fuel expenses over the last 2 years. This forecast is driven in part by the U.S. Energy Information Agency's forecast of higher diesel prices (by nearly 30 cents per gallon, on average) in 2017.
- Fertilizer, lime, and soil conditioner expenses are forecast lower by more than $2 billion (down 9.9 percent) based on lower fertilizer prices and fewer planted acres (though yields and total production are expected to increase) in 2017 for the top 14 planted crops.
- Labor costs are forecast to increase in 2017 by 4.3 percent, continuing the increase in 2016. Wage rate increases are putting upward pressure on hired labor costs.
- Interest expenses are expected to increase by 12.8 percent in 2017, driven by higher forecast debt levels and rising interest rates.
- Net rent expense—the amount paid to rent land, adjusted for any payouts of the landlord's share of government payments and/or insurance indemnities and for any expenses paid by landlords—is forecast to increase by 1.9 percent to $19.8 billion in 2017. As in recent years, the majority of net rent expense will be paid to nonoperator landlords (farmland owners who do not themselves farm) versus landlords who are also operators
Payments to Stakeholders Expected To Increase in 2017
In 2017, payments to stakeholders are forecast to increase by $4.2 billion (6.4 percent), while net value added is forecast to increase by 4.8 percent (see chart below for inflation-adjusted series trends). Net value added represents the sum of economic returns to all the providers of factors of production. It is distributed among stakeholders who receive a fixed payment in return for their services and equity owners who share in the net farm income (profits) of the sector. Stakeholders provide the hired labor, leased capital, and rental land used in agricultural production, but in most cases do not directly share risk in the short term. An exception is landlords who sign share-rent agreements with operators. Consequently, the payments that stakeholders receive can be more stable over time than net farm income received by equity owners.
See data related to payments to stakeholders.