In its latest quarterly update on farm sector profitability, USDA said Tuesday that net farm income for 2014 is likely to be the lowest since 2010, yet will remain above the previous 10-year average.
The update, which also provides a review of expected net cash income, livestock and grain receipts and estimates for farm debt, said changes in commodity prices, as well as the rates of growth in farm assets, have impacted the projections.
Net farm income, the update said, is forecast at $96.9 billion in 2014 – a 21% decline from 2013's estimate of $122.8 billion. The change is due likely to higher expenses, USDA said.
Net cash income is forecast at $108.2 billion, down more than 19% from the 2013 estimate. Its projected decline is less than net farm income, USDA said, primarily because it reflects the sale of carryover stocks from 2013.
Crop receipts are expected to decrease by $27.2 billion in 2014, led by a projected $10.5-billion decline in corn receipts and a $7.9-billion decline in soybean receipts.
Livestock receipts, however, are forecast to increase by nearly as much – $25.7 billion in 2014 – largely due to anticipated record prices for beef cattle and milk.
Net cash income is forecast at $108.2 billion, down more than 19% from the 2013 estimate
While lawmakers touted elimination of direct payments under the 2014 Farm Bill as a money-saving measure, it resulted in only a projected 4% decline in government payments, the report said, due to offsets provided by supplemental and ad hoc disaster payments as farmers dealt with extreme drought.
Farm expenses and assets
Total production expenses are forecast to increase $19.8 billion in 2014, extending the upward movement in expenses that has occurred over the past five years.
The rate of growth in farm assets is forecast to diminish in 2014 compared to recent years. The slowdown in growth is a result of lower net income leading to less capital investment, and moderation in the growth of farmland values.
Farm sector debt is expected to increase 3.1%, increasing more than assets for the first time since 2009.
Most of the anticipated increase in debt is for non-real estate loans with lower income spurring demand for operating funds.
"Despite the anticipated higher debt, the historically low levels of debt relative to assets and equity reaffirm the sector's strong financial position," USDA said.