U.S. agriculturalists on balance will make less money in 2018 than they did in 2017, a new government report projects.
Farm-sector profits will fall in the Upper Midwest, too, though by less than the national average, the report finds.
The U.S. Department of Agriculture's Economic Research Service on Feb. 7 released its 2018 Farm Income Forecast. Key findings of the report, presented by ERS economist Carrie Litkowski during an online presentation to the news media, include the following:
• 2018 net cash farm income is forecast at $91.9 billion, down 5.1 percent from 2017 and the least since 2009.
• 2018 net farm income is estimated at $59.5 billion, down 6.7 percent from 2017 and the least since 2006.
Net cash farm income includes cash receipts from farming, as well as farm-related income, including government payments, minus cash expenses.
Net farm income, a broader measure of profits, incorporates noncash items, including changes in inventories and economic depreciation.
The difference between net cash farm income and net farm income reflects, in part, whether crops and livestock raised in one year are sold in that year or a subsequent year. That decision affects inventories and consequently net farm income.
Less in, more out
A short explanation of why farm-sector profits are projected to fall? More money going out, less money coming in.
ERS projects that higher production expenses, declining crop and livestock receipts and lowered government payments will continue the estimated drops in net cash farm income and net farm income.
Increased interest expense and higher fuel and hired labor costs will push up production expenses, ERS forecasts.
Though soybeans and cattle/calves will fare relatively well in 2018, receipts for most other major crops and livestock groups, particularly cotton and dairy, will decline, the report projects.
Government payments are projected to fall $2.1 billion, or 18.6 percent, much of that due to large declines in Agricultural Risk Coverage and Price Loss Coverage payments, ERS says.
The report projects significant regional differences in farm-sector profitability. Though farm profits will drop nationwide, some areas will be hit less than others.
The Northern Great Plains region - which includes North Dakota, South Dakota and most of Minnesota and Montana - will see a 3.5 percent drop in average net cash farm income for farm businesses in 2018, according to ERS.
That compares with a projected average decline of 7.3 percent for all farm businesses nationwide.
Cattle and calves are relatively important in the Northern Great Plains, so the projected upturn in their profitability this year helps cushion the overall decline in the region this year, ERS says.
What the report calls the "Heartland" - an area that corresponds closely to what's often referred to the Corn Belt - will see a 6.2 percent drop in average net cash farm in 2016, according to ERS.
Soybeans are important in the Corn Belt, and cattle and cattle/calves are common in parts of the region.
Despite the projected 2018 downturn in farm profits, however, farm-sector solvency remains relatively strong by historic standards, Litkowski said.
To see highlights of the forecast: www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/highlig....
To see a fuller version of the forecast:
The ERS's mission "is to anticipate trends and emerging issues in agriculture, food, the environment and rural America and to conduct high-quality, objective economic research to inform and enhance public and private decision making."
As part of that mission, the ERS releases annual farm income statement and balance sheet estimates and forecasts in February, August and November.