U.S. Farm Income Outlook for 2017

U.S. Farm Income Outlook for 2015 Randy Schnepf Specialist in Agricultural Policy February 28, 201418, 2015 Congressional Research Service 7-5700 www.crs.gov R40152 U.S. Farm Income Outlook for 2015 Summary According to USDA’s Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $95.873.6 billion in 20142015, down 2732% from last year’s record $130.5level of $108.0 billion. The 20142015 forecast would be the lowest since 2010, but would remain $8 billion above the previous 10-year average2009. Net cash income is projected down 22.4% in 2015 to $89.4 billion. The forecast for lower net farm income and net cash income is primarily a result of the outlook for lower crop receipts and government payments. In contrast, livestock returns are forecast to be steady to slightly higher. The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79) eliminated direct payments of nearly $5 billion per year, while market prices for program crops—despite their plunge since late 2013—are expected to remain above trigger levels for price-contingent programs, thus keeping government program support at historically low levels in 2014. U.S. agricultural exports are forecast to grow in importance for the sector as expanding international economies are expected to lead to continued increases in demand for both higherquality foods and greater variety of consumer choice in household diets. In addition to record net farm income, farm wealth is also projected to remain at record levels. Farm asset values—which reflect farm investors’ and lenders’ expectations about long-term profitability of farm-sector investments—are expected to rise by 2.4% in 2014 to a record $3,001 billion for a sixth consecutive year of gains. However, the outlook for much lower commodity prices in 2014 has slowed the previously rapid growth of farmland values. Farm debt is projected to rise by 2.3% in 2014, thus lowering the farm debt-to-asset ratio only slightly to 10.5%, its lowest level since 2007. At the farm-household level, average farm household incomes have surged ahead of average U.S. household incomes. In 2013 (the last year for which comparable data were available), the average farm household income of $108,844 was about 53% higher than the average U.S. household income of $71,274. These data suggest a strong financial position heading into 2014 for the agricultural sector as a whole relative to the rest of the U.S. economy, but with substantial regional variation. Declining prices for most major program crops signal tougher times ahead. Eventual 2014 agricultural economic well-being will hinge greatly on the final crop harvests and harvest-time prices, as well as both domestic and international macroeconomic factors, including economic growth and consumer demand. Congressional Research Service U.S. Farm Income Contents Introduction...................................................................................................................................... 1 USDA’s 2014and livestock receipts—down a combined 6.3%. The fall in cash receipts comes despite record corn and soybean harvests in 2014, as commodity prices plunged in the last half of 2014 and are expected to remain at substantially lower levels compared with the period of 20122014, when prices for many major program crops experienced record or near-record highs. Government payments are projected up by 15% to $12.4 billion, which partially offsets the $25.8 billion decline in crop and livestock receipts. The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79) eliminated direct payments of nearly $5 billion per year and replaced them with a new suite of price and revenue support programs. In particular, the Price Loss Coverage (PLC) program replaced the previous Counter-Cyclical Price (CCP) program, but with a set of reference prices based on substantially higher support levels for most program crops. Agricultural Risk Coverage (ARC) relies on a five-year moving average price trigger in its payment calculation, but also adopts the PLC reference price as the minimum guarantee in years when market prices fall below it. The higher relative support levels of PLC and ARC are expected to trigger payments of $6.2 billion in 2015. U.S. farm income experienced a golden period during 2011 through 2014, driven largely by strong commodity prices and agricultural exports. In particular, U.S. agricultural exports have nearly tripled in value since 2000. However, agricultural exports are forecast lower in 2015, down 6% from last year’s record $152.5 billion—due largely to a strengthening U.S. dollar coupled with a weakening economic outlook in several major foreign importing countries. Despite the outlook for lower farm income in 2015, farm wealth is projected to remain at record levels. Farm asset values—which reflect farm investors’ and lenders’ expectations about longterm profitability of farm sector investments—are projected up slightly (0.4%) in 2015 to $3,005 billion, reflecting a leveling off of the previous year’s strong outlook for the general farm economy. The outlook for lower commodity prices in 2015 has slowed the previously rapid growth of farmland values. At the farm-household level, average farm household incomes have surged ahead of average U.S. household incomes since the late 1990s. In 2013 (the last year for which comparable data were available), the average farm household income of $118,373 was about 63% higher than the average U.S. household income of $72,641. The outlook for lower net farm income, coupled with record farm wealth, suggests a mixed financial picture heading into 2015 for the agricultural sector as a whole, with substantial regional variation. Declining prices for most major program crops signal tougher times ahead, and considerable uncertainty surrounds producer participation in the new safety net programs of the 2014 farm bill. Eventual 2015 agricultural economic well-being will hinge greatly on the crop choices made this spring, growing conditions during the spring and summer, and harvest-time prices, as well as both domestic and international macroeconomic factors, including economic growth and consumer demand. Congressional Research Service U.S. Farm Income Outlook for 2015 Contents Introduction...................................................................................................................................... 1 USDA’s 2015 Farm Income Forecast .............................................................................................. 3 Selected Highlights.................................................................................................................... 3 Outlook for U.S. Agriculture for 20142015 ...................................................................................... 4 Recap of U.S. Agriculture in 2013 .........2015 Forecast Cash Receipt Highlights................................................................................... 5 2014 Forecast Cash Receipt Highlights12 Crop Receipts ................................................................................... 10 Crop Highlights ................................. 13 Livestock Receipts ................................................................................ 11 Livestock Highlights ............................ 14 Government Payments ............................................................................. 12 Government Payment Highlights ................................................................ 15 Production Expenses ...................... 13 Production Expense Highlights ............................................................................................... 1517 Agricultural Trade Outlook ..................................................................................................... 1618 Farm Asset Values and Debt .......................................................................................................... 2022 Average Farm Household Income ................................................................................................. 2124 On-Farm vs. Off-Farm Income Shares .................................................................................... 2124 U.S. Total vs. Farm Household Average Income Income ............................................................................................ 22 Farm Household Income by Sales Class ................................................................................. 24 25 Figures Figure 1. Annual U.S. Farm Sector Nominal Income, 1960 to 2014F2015F............................................. 2 Figure 2. Annual U.S. Farm Sector Inflation-Adjusted Income, 1960 to 2014F2015F ............................. 2 Figure 3. U.S. Corn Stocks-to-Use Share to Rise, Prices to Fall in 2014 ........................................ 6 Figure 4. U.S. Soybean Stocks-to-Use Share to Grow, Prices to Fall in 2014 ................................ 6 Figure 5. Monthly Farm Prices for Corn, Soybeans, and Wheat, Nominal Dollars ........................ 7 Figure 6. Monthly Farm Prices for Corn, Soybeans, and Wheat, Indexed Dollars ......................... 7 Figure 7. Monthly Farm Prices for Cotton and Rice, Nominal Dollars ........................................... 8 Figure 8. Monthly Farm Prices for Cotton and Rice, Indexed Dollars ............................................ 8 Figure 9. The Milk-to-Feed Margin Rose to Profitable Levels in 2013 .......................................... 9 Figure 10. The Farm-Price-to-Feed Ratios Turned Favorable for Livestock in 2013...................... 9 Figure 11. Farm Cash Receipts by Source, 1990 to 2014F ............................................................ 10 Figure 12. Crop Cash Receipts by Source, 2007 to 2014F ............................................................ 11 Figure 13. U.S. Livestock Product Cash Receipts by Source, 2007 to 2014F ............................... 12 Figure 14. U.S. Government Farm Support, Direct Outlays, 1997 to 2014F ................................ 13 Figure 15. Farm Cash Production Expenses by Source, 2007 to 2014F........................................ 15 Figure 16. U.S. Agricultural Trade Since 1970.............................................................................. 16 Figure 17. U.S. Agricultural Exports Have Surged Higher Since 2006 Driven by China, NAFTA partners (Canada & Mexico), and Developing Countries ............................................. 17 Figure 18. U.S. Agricultural Trade: Bulk vs. High-Value Shares .................................................. 18 Congressional Research Service U.S. Farm Income Figure 19. U.S. Agricultural Export Value as Share of Gross Cash Income .................................. 18 Figure 20. U.S. Average Farm Land Values, 1985 to 2013F ......................................................... 19 Figure 21. Real Estate Assets Comprise 82% of Total Farm Sector Assets in 2014...................... 19 Figure 22. U.S. Farm Debt-to-Asset Ratio Since 1960.................................................................. 21 Figure 23. U.S. Average Farm Household Income, On- and Off-Farm Sources, Since 1960 .................................................................................................................................. 22 Figure 24Monthly Farm Prices for All-Milk and Cattle (500+ lbs), Nominal Dollars .................... 9 Figure 10. Monthly Farm Prices for All-Milk and Cattle (500+ lbs), Indexed Dollars ................... 9 Figure 11. Monthly Farm Prices for All Hogs and Broilers, Nominal Dollars .............................. 10 Figure 12. Monthly Farm Prices for All Hogs and Broilers, Indexed Dollars ............................... 10 Figure 13. The Milk-to-Feed Margin Fell Sharply in Late 2014 ................................................... 11 Figure 14. The Farm-Price-to-Feed Ratios Turned Unfavorable for Livestock in 2014................ 11 Figure 15. Farm Cash Receipts by Source, 1990 to 2015F ........................................................... 12 Figure 16. Crop Cash Receipts by Source, 2007 to 2015F ............................................................ 13 Figure 17. U.S. Livestock Product Cash Receipts by Source, 2007 to 2015F ............................... 14 Figure 18. U.S. Government Farm Support, Direct Outlays, 1997 to 2015F ................................ 15 Figure 19. Farm Production Expenses by Source, 2007 to 2015F................................................. 17 Figure 20. U.S. Average Farm Land Cash Rental Rates Since 1999 ............................................. 18 Figure 21. U.S. Agricultural Trade Since 1970.............................................................................. 20 Congressional Research Service U.S. Farm Income Outlook for 2015 Figure 22. U.S. Agricultural Exports Have Surged Higher Since 2006, Driven by China, NAFTA Partners (Canada and Mexico), and Developing Countries .......................................... 20 Figure 23. U.S. Agricultural Trade: Bulk vs. High-Value Shares .................................................. 21 Figure 24. U.S. Agricultural Export Value as Share of Gross Cash Income .................................. 21 Figure 25. U.S. Average Farm Land Values, 1985 to 2014F ......................................................... 23 Figure 26. Real Estate Assets Comprise 81% of Total Farm Sector Assets in 2015...................... 23 Figure 27. U.S. Farm Debt-to-Asset Ratio Since 1960.................................................................. 24 Figure 28. U.S. Average Farm Household Income, by Source, Since 1960 .................................. 25 Figure 29. U.S. Farm Household Incomes Have Surged Well Above Average Household Income Since 1996 ..................................................................................................................... 2326 Figure 2530. U.S. Farm vs. Average Household Incomes Expressed as a Ratio ............................... 23 Tables Table 1. Distribution of Farms and Value of Production by Gross Farm Sales, 2011 ................... 24 Table 2. U.S. Crop and Livestock Revenue by Source, 2008-2014F ............................................ 25 Table 3. U.S. Farm Production Expenses by Source, 2008-2014F ................................................ 26 Table 4. 26 Tables Table 1. Annual U.S. Farm Income Since 20072008 ............................................................................. 27 Table 52. Average Annual Income per U.S. Household, Farm versus All, 2006-2013FVersus All, 2008-2015F .................. 28 Table 63. Average Annual Farm Sector Debt-to-Asset Ratio, 2006-2014F2008-2015F ..................................... 28 Table 74. U.S. Prices and Support Rates for Selected Farm Commodities Since 2008/092009/10 Marketing Year ........................................................................................................................... 29 Contacts Author Contact Information........................................................................................................... 30 Congressional Research Service U.S. Farm Income Outlook for 2015 Introduction The U.S. farm sector is vast and varied. It encompasses production activities related to traditional field crops (such as corn, soybeans, wheat, and cotton) and livestock and poultry products (including meat, dairy, and eggs), as well as fruits, tree nuts, and vegetables. In addition, U.S. agricultural output includes greenhouse and nursery products, forest products, custom work, machine hire, and other farm-related activities. The intensity and economic importance of each of these activities, as well as their underlying market structure and production processes, vary regionally based on the agro-climatic setting, market conditions, and other factors. As a result, farm income and rural economic conditions may vary substantially across the United States.1 However, this report focuses singularly on aggregate national net farm income and the status of the farm debt-to-asset ratiofarm debtto-asset status as reported by the U.S. Department of Agriculture (USDA).2 Annual U.S. net farm income is the single most watched indicator of farm sector well-being, as it captures and reflects the entirety of economic activity across the range of production processes, input expenses, and marketing conditions that have persisted during a specific time period. When national net farm income is reported together with a measure of the national farm debt-to-asset situationratio, the two summary statistics provide a quick indicator of the economic well-being of the national farm economy. Measuring Farm Profitability Two different indicators measure farm profitability: net cash income and net farm income. Net cash income compares cash receipts to cash expenses. As such, it is a cash flow measure representing the funds that are available to farm operators to meet family living expenses and make debt payments. For example, crops that are produced and harvested but kept in on-farm storage are not counted in net cash income. Farm output must be sold before it is counted as part of the household’s cash flow. Net farm income is a value of production measure, indicating the farm operator’s share of the net value added to the national economy within a calendar year, independent of whether it is received in cash or noncash form. As a result, net farm income includes the value of home consumption, changes in inventories, capital replacement, and implicit rent and expenses related to the farm operator’s dwelling that are not reflected in cash transactions. Thus, once a crop is grown and harvested it is included in the farm’s net income calculation, even if it remains in on-farm storage. Key Concepts • Net cash income is generally less variable than net farm income. Farmers can manage the timing of crop and livestock sales and of the purchase of inputs to stabilize the variability in their net cash income. For example, farmers farmers can hold crops from large harvests to sell in the forthcoming year, when output may be lower and prices higher. • Off-farm income and crop insurance subsidies, both of which have increased in importance in recent years, are not included in the calculation of aggregate farm income. • Off-farm income is included in the discussion of farm income at the household level in the last sectionat the end of this report. 1 For information on state-level farm income, see the “U.S. and State Farm Income and Wealth Statistics,” available as part part of the Farm Income and Wealth Statistics, Farm Income and Costs, Farm Economy Topics, Economic Research Service (ERS), USDA, at http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics.aspx. 2 For a more detailed discussion of the issues in this report, see the Briefing Room “Farm Income and Costs: 20142015 Farm Sector Income Forecast,” ERS, USDA, at http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/ highlights-from-the-2014-farm2015-farmsector-income-forecast.aspx. Congressional Research Service 1 U.S. Farm Income Outlook for 2015 Figure 1. Annual U.S. Farm Sector Nominal Income, 1960 to 2014F2015F $150 $125 $100 $75 Net Cash Income $50 Net Farm Income $25 $0 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “20142015 Farm Income Forecast,” February 11, 201410, 2015. All values are in nominal terms, that is, not adjusted for inflation. 20132014 is preliminary, 2014; 2015 is forecast. Figure 2. Annual U.S. Farm Sector Inflation-Adjusted Income, 1960 to 2014F2015F $150 $125 Net Cash Income $100 $75 $50 Net Farm Income $25 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “20142015 Farm Income Forecast,” February 11, 201410, 2015. All values are adjusted for inflation using the Bureau of Labor Statistics (BLS), Consumer Price Index (CPI), where 2002-2003=100. 20132014 is preliminary, 2014; 2015 is forecast. Congressional Research Service 2 U.S. Farm Income Outlook for 2015 USDA’s 20142015 Farm Income Forecast BothAccording to USDA’s Economic Research Service (ERS), both net farm income and net cash income are forecast down sharply in 2014sharply lower in 2015, primarily as a result of lower crop receipts and government payments. In contrast, livestock returns are forecast to be steady to slightly higher. The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79) eliminated direct payments of nearly $5 billion per year, while market prices for program crops— despite their plunge since late 2013—are expected to remain above trigger levels for pricecontingent programs, thus keeping government program support at historically low levels in 2014. U.S. agricultural exports are forecast to grow in importance for the sector as expanding international economies are expected to lead to continued increases in demand for both higherquality foods and greater variety of consumer choice in household diets. Total farm asset values are forecast up slightly to a sixth consecutive record high in 2014, while the debt-to-asset ratio is expected to decline slightly to 10.5%, the second-lowest level since 1960.3 These data suggest a strong financial position heading into 2014 for the agricultural sector as a whole relative to the rest of the U.S. economy, but with substantial regional variation. These forecasts are still very preliminary and will depend on actual planting decisions made this spring as well as on weather during the planting, growing, and harvesting seasons. The ongoing drought in California is of particular concern since nearly half of U.S. fruit, vegetable, and tree nut production occurs there. Also, there is some uncertainty about producer participation under the new safety net programs of the 2014 farm bill. Selected Highlights 3 4 • U.S. net farm income is forecast at $95.8 billion in 2014, about $35 billion (27%) below 2013 (Figure 1 and Table 4).4 When adjusted for inflation (Figure 2), last year’s (2013’s) net farm income forecast is the highest since 1973. • Measured in cash terms, net cash income in 2014 is projected lower at $102 billion, down 22% from last year. An estimated $6 billion in commodity sales from carryover 2013 end-of-year inventories prevents net cash income from falling as far as net farm income. • Farm prices for most feedstuffs—feed grains (corn, sorghum, barley, and oats), hay, and protein meals—as well as soybeans have declined sharply through the 2013 harvest and are projected to continue lower in 2014 as U.S. and global grain and oilseed stocks rebuild. • Projections based on normal weather patterns and only minor decreases in crop planting this spring are expected to result in modest production increases (including record corn and soybean harvests), but which fail to offset projected large price declines, thus resulting in lower crop receipts in 2014. • Despite large declines, commodity prices remain above government support levels, thus shutting off price-contingent payments. When coupled with the See discussion later in the report in the section “Farm Asset Values and Debt.” USDA, ERS, Farm Sector Income & Finances, updated November 26, 2013. Congressional Research Service 3 U.S. Farm Income elimination of direct payments by the 2014 farm bill, total government payments in 2014 are projected to fall to $6.1 billion, the lowest level since prior to the 1996 farm bill, when direct payments were initiated (Figure 14). • Total production expenses, at $348 billion, are projected 1% lower in 2014 driven by lower feed costs (down 11%), fertilizer costs (down 12%), and net rent to nonoperator landlords (down 10%). • Record global demand is expected to boost U.S. agricultural product exports to a record high $142.6 billion in 2014, up 1% from the previous year’s record. • Record farm asset values in 2014 ($3,001 billion), driven by continued strong land values, are expected to exceed increases in farm debt ($316 billion), resulting in a sixth successive record high for farm equity ($2,685 billion) and a debt-to-asset ratio of 10.5%, second lowest since 1960. Outlook for U.S. Agriculture for 2014 Assuming normal weather conditions prevail in major growing regions, USDA projects that the 2014/2015 growing period is likely to see a continued rebuilding of global grain and oilseed stocks that began with the large harvests of 2013, thus further moderating crop prices in international markets (Figure 5 through Figure 8). The improving conditions for the livestock sector are evidenced by tracking the evolution of the ratio of livestock output prices to feed costs (Figure 9 and Figure 10), which rose steadily through 2013 and is projected to continue to improve into 2014.5 However, due to a substantial biological lag in production, the cattle and hog sectors are expected to respond slowly to the improving conditions—that is, delayed supply increases are expected to support relatively high farm prices through 2014. As a result, retail meat prices in 2014 are projected up 3% to 4% for beef and poultry, and 2% to 3% for pork. The two largest U.S. commercial crops—in terms of both value and quantity—are corn and soybeans. These two crops provide important inputs for domestic livestock, poultry, and biofuels sectors. In addition, the United States has traditionally been one of the world’s leading exporters of corn, soybeans, and soybean products—vegetable oil and meal. As a result, the outlook for these two crops is critical to both farm sector profitability and regional economic activity across large swaths of the United States, as well as in international markets. Both corn and soybeans are projected to enjoy record harvests (assuming normal weather and trend yields), thus helping to rebuild stocks and pressure prices lower (Figure 3 and Figure 4).6 USDA highlights four factors as crucial in determining how the U.S. agricultural economy will fair in 2014 and beyond: (1) record global demand, which is expected to boost U.S. agricultural exports; (2) continued strong corn use for ethanol in 2014 with projections of continued growth over the next 10 years; (3) uncertainties surrounding the new farm bill, which will present program choices for most row crop farmers but are expected to have minimal impact on planting decisions; and (4) substantial uncertainty regarding lingering drought in the West, which could 5 Feed costs are generally the largest cost component in livestock operations ranging from 30% to 80% of variable costs. A historical comparison of livestock output prices to feed costs provides an indicator of sector profitability— rising output prices relative to feed costs suggest improving profitability. 6 Commodity-specific 2014 outlook reports by USDA from the USDA Outlook Forum, Feb. 21, 2014; are available at http://www.usda.gov/oce/forum/commodity.html. Congressional Research Service 4 U.S. Farm Income continue to affect livestock and specialty crops such as fruits, vegetables, and tree nuts, particularly in California.7 Recap of U.S. Agriculture in 2013 U.S. crop production was severely reduced in 2012 due to one of the worst nationwide droughts in several decades. As a result, heading into the 2013 crop year, both corn and soybeans had season-ending stocks projected at or near historic low levels relative to annual usage (Figure 3 and Figure 4). With record-high commodity prices in early 2013 (Figure 5), most market watchers anticipated substantial increases in planted acres for both corn and soybeans. However, an exceptionally wet spring across major crop regions of the corn-belt and prairie states resulted in substantial delays in crop planting as well as above-average prevented planting acres. A lateplanted crop tends to be more vulnerable to summer heat and dryness and an early frost in the fall, because the normal growing cycle is pushed later into the summer and fall months. Despite the delay in plantings, producers—driven by record-high farm prices—still managed to plant 95.3 million acres of corn, down slightly from 2012 plantings but still the second-most since 1936, and 76.5 million acres of soybeans (equal to average plantings during the preceding five years). As a result, in its preliminary outlook report for the 2013 crop year, USDA forecast a record harvest for both crops assuming normal weather and a return to trend yields.8 In early summer, this record harvest outlook began to weigh on market prices. By November, USDA projected U.S. corn production at a record 14 billion bushels and a near-record soybean crop of 3.3 billion bushels.9 These large crops pushed both crop prices and feed costs lower—thus simultaneously diminishing the crop revenue outlook while bolstering the livestock sector profitability outlook. Meanwhile, the high feed costs and lack of forage from severe drought conditions across much of the United States’ major crop growing regions during 2012 had resulted in substantial herd liquidation and declining cattle supplies. In early 2013 the dairy, hog, and poultry sectors were also still under extreme financial pressure from high feed costs that had persisted since early 2011. This situation slowly began to unwind during 2013 as crop prospects improved. Record or near-record high meat and dairy products prices coupled with sharply lower prices for their major cost component—feed grains and protein meals (derived primarily from crushing oilseeds)— reversed the severe economic pressure that the U.S. livestock, poultry, and dairy sectors had experienced during 2011 and 2012. Cash receipts for other crops (Table 2), including fruits and tree nuts, vegetables and melons, and nursery crops and other horticulture, were also very favorable, as they generated a combined record cash revenue of $78.3 billion, up nearly 7% from 2012’s record output. In short, 2013 was one of the most favorable years ever recorded for U.S. agriculture and represents a very high peak from which the success of 2014 will be judged. 7 Joseph Glauber, “The Outlook for U.S. Agriculture,” USDA Outlook Forum, February 20, 2014; speech and presentation available at http://www.usda.gov/oce/forum/index.htm. 8 World Agricultural Outlook Board (WAOB), World Agricultural Supply and Demand Estimates (WASDE) Report, November 8, 2013. 9 WAOB, WASDE, USDA, August 12, 2013. Congressional Research Service 5 U.S. Farm Income Figure 3. U.S. Corn Stocks-to-Use Share to Rise, Prices to Fall in 2014 70% Stocks-to-Use Ratio $/bushel $6.89 $8.00 $7.00 60% $6.00 50% $5.00 40% $4.00 $3.90 30% $3.00 20% 15.8% 7% 10% 0% $2.00 5% $1.00 $0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Data through 2013: WAOB, USDA, WASDE, Feb. 10, 2014; 2014 forecast: USDA Outlook Forum. Figure 4. U.S. Soybean Stocks-to-Use Share to Grow, Prices to Fall in 2014 35% Stocks-to-Use Ratio $/bushel $16.00 $14.40 $14.00 30% $12.00 25% $10.00 $9.65 20% $8.00 15% $6.00 10% 4.6% 5% 8.3% 5.4% $4.00 4.4% $2.00 4.0% 0% $0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Data through 2013: WAOB, USDA, WASDE, Feb. 10, 2014; 2014 forecast: USDA Outlook Forum. Congressional Research Service 6 U.S. Farm Income Figure 5. Monthly Farm Prices for Corn, Soybeans, and Wheat, Nominal Dollars $8 $ per bu. (corn) $ per bu. (soybeans, wheat) $16 Soybeans $6 $12 Corn $4 $8 Wheat $2 $4 $0 2002 $0 2004 2006 2008 2010 2012 2014 Source: USDA, National Agricultural Statistics Service (NASS), Agricultural Prices, January 31, 2014. Figure 6. Monthly Farm Prices for Corn, Soybeans, and Wheat, Indexed Dollars 350 Corn 300 250 2002-2003 = 100 200 Wheat Soybeans 150 100 50 2000 2002 2004 2006 2008 2010 2012 2014 Source: USDA, NASS, Agricultural Prices, January 31, 2014. Notes: Prices are indexed to 2002-2003 = 100 to permit relative comparisons. Congressional Research Service 7 U.S. Farm Income Figure 7. Monthly Farm Prices for Cotton and Rice, Nominal Dollars $20 $100 Rice $80 Cotton $12 $60 $8 $40 $4 $20 $0 2002 $ per pound (cotton) $ per cwt (rice) $16 $0 2004 2006 2008 2010 2012 2014 Source: USDA, NASS, Agricultural Prices, January 31, 2014. Notes: cwt = hundredweight or units of 100 lbs. Figure 8. Monthly Farm Prices for Cotton and Rice, Indexed Dollars 400 350 Rice 300 2002-2003 = 100 250 200 Cotton 150 100 50 2000 2002 2004 2006 2008 2010 2012 2014 Source: USDA, NASS, Agricultural Prices, January 31, 2014. Notes: Prices are indexed to 2002-2003 = 100 to permit relative comparisons. Congressional Research Service 8 U.S. Farm Income Figure 9. The Milk-to-Feed Margin Rose to Profitable Levels in 2013 (Ratio of national average farm-price received per 100 lbs. of milk to feed costs) $16 $/cwt. $14 $12 $10 $8 $6 $4 $2 $0 2000 2002 2004 2006 2008 2010 2012 2014 Source: USDA, NASS, Agricultural Prices, January 31, 2014; calculations by CRS. Note: For pricing dairy feed, USDA uses 51% corn, 8% soybeans, and 41% alfalfa. Figure 10. The Farm-Price-to-Feed Ratios Turned Favorable for Livestock in 2013 (Ratio of national average farm-price received per 100 lbs. of meat to per-unit feed cost) 60 9 Steers & Heifers 500+ lbs 50 40 6 Broilers (right axis) 30 20 3 10 Hogs 0 2002 0 2004 2006 2008 2010 2012 2014 Source: USDA, NASS, Agricultural Prices, January 31, 2014. Notes: Cattle and hog feed cost is 100% corn; broilers feed cost is 58% corn, 42% soybeans. Congressional Research Service 9 U.S. Farm Income 2014 Forecast Cash Receipt Highlights • Total farm sector gross cash receipts for 2014 are projected at $412.3 billion, down 7% from last year’s record (Figure 11 and Table 2) driven largely by falling field crop revenues. • Farm sector revenue sources and shares include crop revenues (46% of sector revenues), livestock receipts (45%), government payments (about 2%), and other farm-related income, including crop insurance indemnities, machine hire, and custom work (8%). Figure 11. Farm Cash Receipts by Source, 1990 to 2014F $450 Government Payments Farm-Related Income $375 $300 $225 $150 Livestock Product Receipts $75 Crop Receipts $0 1990 1995 2000 2005 2010 Source: USDA, ERS, “2014 Farm Income Forecast,” February 11, 2014. Notes: 2014 is forecast. Receipts from crop and livestock product sales, and government payments, are described in more detail below. Farm-related income includes income from custom work, machine hire, agritourism, forest product sales, insurance indemnities, and cooperative patronage dividend fees. Congressional Research Service 10 U.S. Farm Income Figure 12. Crop Cash Receipts by Source, 2007 to 2014F $250 Other $200 Cotton Fruit & Vegs $150 Food crops Oil crops $100 Feed crops $50 $0 2007 2008 2009 2010 2011 2012 2013F 2014F Source: USDA, ERS, “2014 Farm Income Forecast,” February 11, 2014. Notes: 2013 is preliminary, 2014 is forecast. See Table 2 for details. Crop Highlights Total crop sales are projected at $189 billion, down 12% year-to-year (Figure 11). The crop sector includes projections for: • feed crops—corn, barley, oats, sorghum, and hay—of $60 billion, down 15%; • oil crops—soybeans, peanuts, and other minor oilseeds—of $36.5 billion, down 16%; • food grains—wheat and rice—of $14 billion, down 20%; • fruits and nuts, vegetables, and melons of $46 billion, down 11%; • cotton of $5.9 billion, up 11%; and • all other crops including tobacco of a record $26.8 billion, up slightly by 0.2%. The length and severity of the California drought has important national implications for retail food prices—California accounts for about one-third of U.S. vegetable production, almost twothirds of U.S. fruit and nut, about 20% of U.S. milk, and a substantial portion of wine production. Congressional Research Service 11 U.S. Farm Income Figure 13. U.S. Livestock Product Cash Receipts by Source, 2007 to 2014F Other $180 Dairy $150 Poultry & Eggs $120 $90 Hogs $60 Cattle & calves $30 $0 2007 2008 2009 2010 2011 2012 2013F 2014F Source: USDA, ERS, “2013 Farm Income Forecast,” February 11, 2014. Notes: 2013 is preliminary, 2014 is forecast. See Table 2 for details. Livestock Highlights The livestock sector, broadly defined, includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector are projected record-large in 2014 at $183.4 billion, up about 1% from the previous year’s record, driven largely by projected gains in dairy. Highlights for individual activities include projections for: • record cattle and calf sales of over $69 billion, up slightly by 0.6%; • hog sales of $21.8 billion, down 6% from last year’s record; • poultry and egg sales of $43.7 billion, down about 2% from the previous year’s record; and • record dairy sales, valued at $43.1 billion, up 7% year-to-year. Congressional Research Service 12 U.S. Farm Income Figure 14. U.S. Government Farm Support, Direct Outlays, 1997 to 2014F $25 All Other Ad Hoc and Emergency Conservation $20 Price Contingent Direct Payments $15 $10 $5 $0 1997 1999 2001 2003 2005 2007 2009 2011 2013F Source: USDA, ERS, “2014 Farm Income Forecast,” February 11, 2014. Notes: Data are on a fiscal year basis and may not correspond exactly with the crop or calendar year; 2013 is preliminary, 2014 is forecast. Direct payments include production flexibility contract payments enacted under the 1996 farm bill and fixed direct payments of the 2002 and 2008 farm bills; price-contingent outlays include loan deficiency payments, marketing loan gains, counter-cyclical payments and ACRE payments; conservation outlays include Conservation Reserve Program payments along with other conservation program outlays; Ad Hoc and Emergency includes emergency supplemental crop and livestock disaster payments and market loss assistance payments for relief of low commodity prices; and “All Other” outlays include peanut quota buyout payments, milk income loss payments, tobacco transition payments, and other miscellaneous expenditures. Government Payment Highlights Government farm payments are projected down sharply in 2014 at $6.1 billion (down 45%). This would be the lowest outlay since before 1996. The decline is largely due to a combination of the elimination of annual direct payments of about $5 billion and lower ad hoc disaster assistance payments. In addition, relatively high commodity prices (above government program payment triggers) are expected to keep payments under the price-contingent programs at minimal levels (Figure 14). • Government payments are expected to represent a relatively small share (1.5%) of projected gross cash income of $412 billion (Figure 11). • In contrast, government payments are expected to represent 6% of net farm income of $95.8 billion; however, the importance of government payments as a percent of net farm income varies nationally by sector and region. Congressional Research Service 13 U.S. Farm Income • Farm fixed direct payments, whose payment rates were fixed in previous legislation, are eliminated by the 2014 farm bill.10 • Cotton producers are eligible to receive transition payments (new under the 2014 farm bill) for crop years 2014 and 2015 as they transition into coverage authorized by the new Stacked Income Protection Plan (STAX).11 Fixed by legislation, these cotton transition payments are forecast at $577 million in 2014. • Payments under the price-contingent marketing loan benefit and the new Price Loss Coverage (PLC) and Average Risk Coverage (ARC) programs (created by the new 2014 farm bill) are expected to remain at $0 in 2014, as program crop prices are expected to remain above program payment triggers (Table 7). • Payments under the Average Crop Revenue (ACRE) program for 2013 that will go out in 2014 are forecast at $190 million, mostly for corn and soybeans that were hardest hit by drought. • Although still available in 2014, no Milk Income Loss Contract payments— which compensate dairy producers when domestic milk prices fall below a specified benchmark price subject to feed-cost adjustments—are forecast due to high milk prices and relatively low feed costs. • Conservation programs include all conservation programs operated by USDA’s Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) that provide direct payments to producers. Estimated conservation payments of $3.7 billion are forecast for 2014, unchanged from 2013. • Supplemental and ad-hoc disaster assistance payments are forecast at $1 billion in 2014, a 48% decrease from 2013 levels.12 Noninsured Assistance Program payments of $150 million are expected to be made to livestock and specialty crop producers for which no commodity insurance program is available. Livestock producers are eligible to receive payments under the Livestock Forage Program (LFP) and the Livestock Indemnity Program (LIP) retroactive to FY2012. Payments under these two programs are expected to amount to a combined $810 million in 2014 and are for multiple years, mostly covering losses (feed expenses) incurred during the 2012 drought. 10 For details see CRS Report R43076, The 2014 Farm Bill (P.L. 113-79): Summary and Side-by-Side. Ibid. 12 CRS Report RS21212, Agricultural Disaster Assistance. 11 Congressional Research Service 14 U.S. Farm Income Figure 15. Farm Cash Production Expenses by Source, 2007 to 2014F $400 Overhead $300 Other operating costs $200 Interest Hired Labor Manufactured inputs $100 Farm origin inputs $0 2007 2008 2009 2010 2011 2012 2013F 2014F Source: USDA, ERS, “2014 Farm Income Forecast,” February 11, 2014. Notes: 2013 is preliminary, 2014 is forecast. See Table 3 for details. Production Expense Highlights Production expenses for the U.S. agricultural sector are expected to drop for the first time since 2009 (Figure 15 and Table 3)—at $348 billion, they are projected down about 1% from 2013. The principal reasons for the slowdown are lower feed costs (down 11% at $52 billion), fertilizer costs (down 12% at $23 billion), and net rent to non-operator landlords (down 10% at $1.6 billion). The increase in expenses will affect crop and livestock farms differently. The principal expenses for livestock farms—that is, feed and feeder animals and poultry—in the net, are forecast down 6% from 2013 at $77.4 billion. In contrast, the principal crop expenses—that is, seed, fertilizer, pesticides, and crop insurance premiums—are forecast down by about 2% to $98.7 billion. The miscellaneous operating expenses category (Table 3), which is projected up $1.3 billion (3%) to $40 billion, includes crop insurance premiums and thus directly impacts crop production. Congressional Research Service 15 U.S. Farm Income Figure 16. U.S. Agricultural Trade Since 1970 $150 Exports $120 $90 $60 Imports $30 Trade Surplus $0 1970 1980 1990 2000 2010 Source: USDA, Outlook for U.S. Agricultural Trade, AES-81, February 20, 2014, ERS, USDA. Notes: 2013 is an estimate, 2014 is a projection. Agricultural Trade Outlook A major catalyst behind projections for stronger farm income is the strength of U.S. agricultural exports—forecast at a record $142.6 billion in 2014, up 1% from 2013’s previous record (Figure 16). U.S. agricultural imports also are projected record-large in 2014 at $110 billion, up 6% yearto-year. The resulting U.S. agricultural trade surplus is projected at $32.6 billion in 2014, down 12%. 13 • The top three markets for U.S. agricultural exports are China, Canada, and Mexico, where imports from the United States have surged by about $25 billion since 2009 to a combined projection of $65.2 billion in FY2014 (Figure 17). • A substantial portion of the increase in U.S. agricultural exports since 2010 has also been due to higher-priced grain and feed shipments plus record oilseed exports to China, and growing animal product exports to East Asia.13 • The fourth- and fifth-largest U.S. export markets are the EU and Japan, which are projected to account for $23.6 billion in imports in FY2014. Although important as major buyers of U.S. agricultural products, these two markets have shown relatively limited growth when compared with the rest of the world. USDA, ERS, Outlook for U.S. Agricultural Trade, AES-81, February 20, 2014, ERS, USDA. Congressional Research Service 16 U.S. Farm Income Figure 17. U.S. Agricultural Exports Have Surged Higher Since 2006 Driven by China, NAFTA partners (Canada & Mexico), and Developing Countries $150 China $ Billion $125 Mexico $100 Canada $75 $50 Rest of World $25 EU $0 Japan 1967 1977 1987 1997 2007 Source: USDA, Outlook for U.S. Agricultural Trade, AES-81, February 20, 2014, ERS, USDA. • The “Rest of World” component of U.S. trade includes Middle Eastern, African, and Southeast Asian markets that have also shown dramatic import growth of U.S. agricultural products in recent years. • Over the past four decades, steady growth in high-valued export products (Figure 18) has helped to push U.S. agricultural export value to ever higher totals. This pattern plateaued temporarily in 2006, when rapid growth in demand from both international commodity markets and domestic biofuels pushed prices for most bulk crops (especially feed grains and oilseeds) to record levels. As grain and oilseed prices recede, so will the bulk value share of U.S. exports. • Bulk commodity shipments (primarily wheat, rice, feed grains, soybeans, cotton, and unmanufactured tobacco) are forecast at a record low 33% share of total U.S. agricultural exports in 2014, at $46.8 billion. • In contrast, high-valued export products—including horticultural, livestock, poultry, and dairy—are forecast at $95.8 billion in 2014. • As a share of total gross farm receipts, U.S. agricultural exports are projected to account for 32% of earnings in 2014 (Figure 19). Congressional Research Service 17 U.S. Farm Income Figure 18. U.S. Agricultural Trade: Bulk vs. High-Value Shares 100% 80% 60% High-Value 40% 20% Bulk 0% 1975 1980 1985 1990 1995 2000 2005 2010 Source: USDA, Outlook for U.S. Agricultural Trade, AES-81, February 20, 2014, ERS, USDA. Figure 19. U.S. Agricultural Export Value as Share of Gross Cash Income 40% U.S. Agricultural Exports as Share of Total Gross Farm Income 30% 20% 10% 0% 1935 1945 1955 1965 1975 1985 1995 2005 2015 Source: USDA, Outlook for U.S. Agricultural Trade, AES-81, February 20, 2014, ERS, USDA. Congressional Research Service 18 U.S. Farm Income Figure 20. U.S. Average Farm Land Values, 1985 to 2013F Source: USDA, NASS, Land Values 2013 Summary, August 2013. Notes: 2013 is a forecast. Farm real estate value measures the value of all land and buildings on farms. Cropland and pasture values are only available since 1998. Figure 21. Real Estate Assets Comprise 82% of Total Farm Sector Assets in 2014 $3 $ Trillion $2 All Other Assets $1 Real Estate $0 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “2014 Farm Income Forecast,” February 11, 2014; 2014 is forecast. Notes: Non-real estate assets include financial assets, inventories of agricultural products, and the value of machinery and motor vehicles. Congressional Research Service 19 U.S. Farm Income Farm Asset Values and Debt The U.S. farm income and asset-value situation and outlook suggest a strong financial position heading into 2014 for the agriculture sector as a whole. Measuring Farm Wealth A useful measure of the farm sector’s financial wherewithal is farm sector net worth as measured by farm assets minus farm debt. A summary statistic that captures this relationship is the debt-to-asset ratio. Farm Assets include both physical and financial farm assets. Physical Assets include land and buildings, farm equipment, on-farm inventories of crops and livestock, and other miscellaneous farm assets. Financial Assets include cash, bank accounts, and investments such as stocks and bonds. Farm Debt includes both business and consumer debt linked to real estate and non-real estate assets of the farm sector. The Debt-to-Asset Ratio compares the farm sector’s outstanding debt related to farm operations relative to the value of the sector’s aggregate assets. Change in the debt-to-asset ratio is a critical barometer of the farm sector’s financial performance with lower values indicating greater financial resiliency. A smaller debt-to-asset ratio suggests that the sector is better able to withstand short-term increases in debt related to interest rate fluctuations or changes in the revenue stream related to lower output prices, higher input prices, or production shortfalls. The largest single component in a typical farmer’s investment portfolio is their farmland. As a result, real estate values affect the financial well-being of agricultural producers and serve as the principal source of collateral for farm loans. • Farm asset values—which reflect farm investors’ and lenders’ expectations about long-term profitability of farm sector investments—are projected up 2.4% in 2014 to $3,001 billion, reflecting a continued strong outlook in the general farm economy (Table 6). • Higher farm asset values are due primarily to stronger farm real estate values (Figure 20 and Figure 21). Real estate traditionally accounts for the bulk of total value of farm sector assets. • After rebounding from a 2.8% decline during 2009—the first decline since 1987—farm real estate values have grown by an estimated 38% through 2013, due largely to strong crop prices. In 2014, real estate assets are expected to account for 82% of total farm assets. • This same pattern is reflected in both cropland and pastureland values (up 50% and 12%, respectively, since 2009). Land value growth is closely linked to commodity prices and is expected to plateau or recede slightly if the forecasts for lower commodity prices and the prospect for continued global stock recovery for grains and oilseeds are realized in 2014. • Meanwhile, total farm debt is forecast to rise to $316.2 billion in 2014 (up 2.3% year-to-year). As a result of the relatively higher gains by farm asset values than farm debt, farm equity (or net worth, defined as asset value minus debt) is projected record-high in 2014, at $2,685 billion. • The farm debt-to-asset ratio had been steadily declining since 1985’s peak value of 23%—except for a one-year reversal in 2008, to 10.5% in 2014 (Figure 22). Congressional Research Service 20 U.S. Farm Income Figure 22. U.S. Farm Debt-to-Asset Ratio Since 1960 25% 20% 15% Farm Debt-to-Asset Ratio 10% 5% 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “2014 Farm Income Forecast,” February 11, 2014; 2013 is preliminary, 2014 is forecast Average Farm Household Income Farm household wealth is derived from a variety of sources.14 A farm can have both an on-farm and an off-farm component to its balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because there are other stakeholders in farming, such as landlords and contractors, and because farm operator households often have nonfarm investments, jobs, and other links to the nonfarm economy. On-Farm vs. Off-Farm Income Shares • Average farm household income (the sum of both on- and off-farm income) is projected up slightly (4%) in 2013 for a fourth consecutive year of growth at $109,035 (Table 5). • The share of farm income derived from off-farm sources had increased steadily for decades but appears to have peaked at about 95% in 2002. 14 USDA, ERS, “Farm Household Well-being,” online webpage accessed on February 28, 2014, at http://www.ers.usda.gov/topics/farm-economy/farm-household-well-being.aspx. Congressional Research Service 21 U.S. Farm Income • In 2013, off-farm income sources are forecasted to account for about 82% of the national average farm household income, compared with about 18% from farming activities (Figure 23). Figure 23. U.S. Average Farm Household Income, On- and Off-Farm Sources, Since 1960 $100,000 $80,000 $60,000 $40,000 Off-Farm $20,000 $0 On-Farm 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “Farm Household Economics and Well-Being: Historic Data On Farm Operator Household Income,” November 26, 2013. U.S. vs. Farm Household Income • Over the past decade, farm household incomes have surged ahead of average U.S. household incomes (Figure 24 and Figure 25). • In 2012 (the last year for which comparable data were available), the average farm household income of $108,844 was about 53% higher than the average U.S. household income of $71,274 (Table 5). Congressional Research Service 22 U.S. Farm Income Figure 24. U.S. Farm Household Incomes Have Surged Well Above Average Household Income Since 1996 Average Farm Household Income $100,000 $80,000 $60,000 Average U.S. Household Income $40,000 $20,000 $0 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “2013 Farm Income Forecast,” November 26, 2013. Note: 2012 is preliminary, 2013 is forecast. Figure 25. U.S. Farm vs. Average Household Incomes Expressed as a Ratio 150% 125% 100% 75% Ratio of Farm to U.S. Average Household Income 50% 1960 1970 1980 1990 2000 2010 Source: See above source note. 2012 is the last year with comparable data. Congressional Research Service 23 U.S. Farm Income Farm Household Income by Sales Class The share of income from farming increases with farm size as measured by gross sales (Table 1). • “Large” commercial farm households (farms with annual sales greater than $250,000) obtained nearly 75% of household income on-farm and accounted for 82% of the value of total U.S. agricultural production in 2011, while representing only about 10% of farm households.15 • Intermediate family farms (farms with annual sales in excess of $10,000 but less than $250,000) obtained about 10% of household income from on-farm sources, accounted for about 17% of the value of total U.S. agricultural production, and represented about 30% of family farms. • “Small” farm households (annual sales < $10,000) actually lost revenue from farm operations (-9% of household income) and accounted for slightly more than 1% of the value of total U.S. agricultural production in 2011, while representing 59% of farm households. Many of these small farms are classified as rural residence farms and either receive little or no income from farm sources or have a total income level that qualifies them as limited-resource farms. Table 1. Distribution of Farms and Value of Production by Gross Farm Sales, 2011 Family Farms Value of Gross Sales Total U.S. Production On-farm Share Off-farm Share 1.2% -9% 109% $70,507 30% 16.5% 10% 90% $79,780 219,422 10% 82.3% 75% 25% $205,215 2,114,668 100% 100.0% 17% 83% $87,289 Number Share Share 1,255,816 59% $10,000 to $249,999 639,430 > $250,000 < $10,000 All Total Household Income (Mean) Total Value Source: USDA, ERS, Farm Income and Wealth Statistics; Farm Household Income and Characteristics, updated as of November 27, 2012. 15 For more information on farm typology, see the ERS Briefing Room, Farm Household Well-Being, at http://www.ers.usda.gov/topics/farm-economy/farm-household-well-being.aspx. Congressional Research Service 24 U.S. Farm Income Table 2. U.S. Crop and Livestock Revenue by Source, 2008-2014F ($ billions) 2009 2010 2011 2012 2013a 2014a Change (%) Field crops 104.8 113.0 131.9 150.2 137.8 116.7 -15.3% Food grains 14.8 14.1 16.8 18.2 17.7 14.1 -20.4% Wheat 11.7 11.1 13.9 15.3 14.7 11.0 -25.2% Rice 3.0 3.0 2.9 2.8 2.9 3.0 3.4% Feed crops 50.5 54.8 72.0 79.1 71.2 60.2 -15.4% Corn 42.5 47.2 62.9 69.2 60.0 49.0 -18.3% Other Grains 2.4 2.3 2.1 2.6 2.8 2.4 -14.3% Hay 5.6 5.3 7.0 7.3 8.4 8.8 4.8% Oil Crops 35.6 36.5 35.6 44.3 43.6 36.5 -16.3% Soybeans 33.7 34.5 33.3 40.7 40.8 34.5 -15.4% Peanuts 0.8 0.9 1.2 2.3 1.5 1.0 -32.3% Cotton (lint & seed) 4.0 7.6 7.4 8.6 5.3 5.9 11.3% Other Crops 64.0 66.6 70.2 73.3 78.3 72.7 -7.1% Fruits and nuts 19.3 21.7 24.4 26.1 26.3 23.1 -12.2% Vegetables 20.4 20.2 20.7 20.6 25.3 22.9 -9.6% All other crops 24.3 24.6 25.0 26.6 28.5 28.6 0.4% Total Crops 168.8 179.5 202.0 223.5 216.1 189.4 -12.3% Meat animals 59.0 69.5 84.7 90.1 92.0 91.0 -1.1% Cattle & calves 43.8 51.5 63.0 67.9 68.8 69.2 0.6% Hogs 14.7 18.0 21.8 22.2 23.2 21.8 -6.0% Sheep & lambs 0.4 0.4 0.4 0.4 0.4 0.4 0.0 Poultry and eggs 32.5 35.5 36.2 39.0 44.5 43.7 -1.7% Broilers 21.8 23.7 23.0 24.8 29.6 29.3 -1.0% Turkeys 3.6 4.4 5.0 5.4 4.9 5.0 2.0% Eggs 6.1 6.5 7.3 7.8 8.7 8.2 -5.7% All dairy 24.3 31.4 39.5 37.0 40.2 43.1 7.3% Other livestock 4.5 5.1 5.5 5.4 5.5 5.5 1.1% Total Livestock 120.3 141.4 165.9 171.6 182.2 183.4 0.7% Government payments 12.2 12.4 10.4 10.6 11.2 6.1 -45.4% Other farm incomeb 22.0 18.3 26.1 33.6 35.7 33.4 -6.4% Total Farm Revenue 323.3 351.7 404.5 439.3 445.2 412.3 -7.4% Item Source: “USDA, ERS, Farm Income and Wealth Statistics”; updated as of February 11, 2014. a. Forecast. Change represents year-to-year projected change between 2014 and 2013. b. Machine hire, custom work, forest products sales, insurance indemnities, and other farm income. Congressional Research Service 25 U.S. Farm Income Table 3. U.S. Farm Production Expenses by Source, 2008-2014F ($ billions) 2009 2010 2011 2012 2013a 2014a Change (%) Farm origin inputsb 77.3 81.4 94.2 102.9 103.8 99.0 -4.6% Feed 45.0 45.4 54.6 59.1 58.7 52.1 -11.3% Livestock 16.7 19.6 21.7 23.4 23.8 25.4 6.5% Seed 15.5 16.3 17.8 20.3 21.3 21.6 1.5% Manufactured inputsc 49.0 49.6 57.5 63.2 61.4 58.6 -4.6% Fertilizer & lime 20.1 21.0 25.1 28.5 26.2 23.1 -12.0% Fuels & oils 12.7 13.2 15.6 15.7 15.7 15.7 1.0% Electricity 4.6 4.6 4.9 5.3 5.3 5.9 4.2% Pesticides 11.5 10.7 11.8 13.7 14.0 14.0 -0.6% Total interest charges 17.6 16.9 16.0 16.1 16.6 17.9 7.8% Short-term interest 7.5 6.8 5.9 6.0 6.6 6.9 5.4% Real-estate interest 10.1 10.0 10.2 10.1 10.1 11.0 9.3% Other operating exp.d 88.8 84.9 88.3 97.2 105.9 109.2 3.1% Repair & maintenance 14.7 14.8 15.5 16.6 17.3 17.5 1.1% Hired & contract labor 28.9 26.8 26.2 30.5 33.6 35.1 4.5% Custom work 3.9 4.3 4.0 4.8 4.9 4.9 0.0% Marketing, storage, etc. 10.3 10.3 10.2 10.1 11.3 11.6 3.0% Miscellaneous 31.0 28.7 32.5 35.3 38.9 40.1 3.2% 50.3 54.1 55.9 61.2 64.1 63.1 -1.6% Capital consumption 30.1 30.7 32.1 34.2 35.0 35.4 1.1% Property taxes 10.4 10.8 11.3 11.5 11.9 12.1 2.3% Non-operator net rent 9.8 12.6 12.5 15.5 17.2 15.6 -9.6% 283.0 287.5 312.5 341.1 352.2 348.2 -1.1% Item Overhead expensese Total Production Exp. Source: USDA, ERS, Farm Income and Wealth Statistics; updated as of February 11, 2014; available at http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics.aspx. a. Forecast. Change represents year-to-year projected change between 2014 and 2013. b. Farm origin inputs include purchases of feed, livestock and poultry, and seed. c. Manufactured inputs include fertilizers and lime, pesticides, petroleum fuel and oils, and electricity. d. Other operating costs include repair and maintenance of capital items, machine hire and custom work, marketing storage, transportation expenses, and other miscellaneous expenses. e. Overhead expenses include property taxes, net rent to a non-operator landlord, and capital consumption. Congressional Research Service 26 Table 4. Annual U.S. Farm Income Since 2007 ($ billions) Item 2007 2008 2009 2010 2011 2012 2013a 2014a Change (%) 1. Cash receipts 288.5 316.3 289.1 321.0 367.9 395.1 398.3 372.8 -6.4% Cropsb Livestock 2. Government paymentsc 150.1 138.5 174.8 141.6 11.9 12.2 168.9 120.3 12.2 179.5 141.4 12.4 202.0 165.9 10.4 223.5 171.6 10.6 216.1 182.2 11.2 189.4 183.4 6.1 -12.3% 0.7% -45.4% Fixed direct CCPe Marketing Loan Benefitsf Conservation Ad hoc and emergency All otherg 3. Farm-related incomeh 5.1 1.1 1.1 3.1 0.5 1.0 17.6 5.1 0.7 0.3 3.2 2.1 0.8 21.5 4.7 1.2 1.1 2.8 0.6 1.7 22.0 4.8 0.2 0.1 3.5 3.1 0.7 18.3 4.7 0.0 0.0 3.7 1.3 0.7 26.1 4.7 0.0 0.0 3.7 1.1 1.1 33.6 0.6 0.0 0.0 3.7 1.0 0.6 33.4 -86.8% 0.0% 0.0% -0.1% -47.6% -31.1% -6.4% 4. Gross cash income (1+2+3) 5. Cash expensesi 6. NET CASH INCOME 318.0 240.6 77.4 350.1 261.1 88.9 323.3 249.4 73.9 351.7 253.9 97.7 404.5 277.7 126.8 439. 3 304.9 134.4 445.2 315.1 130.1 412.3 310.3 102.0 -7.4% -1.5% -21.6% 7. Total gross revenuesj 8. Total production expensesk 9. NET FARM INCOME 339.6 269.5 70.0 377.9 292.6 85.0 343.3 283.0 60.4 365.5 287.5 78.0 430.5 312.5 118.0 454.9 341.1 113.8 482.7 352.2 130.5 444.0 348.2 95.8 -8.0% -1.1% -26.6% paymentsd 4.4 0.0 0.0 3.7 1.9 0.9 35.07 Source: USDA, ERS, Farm Income and Wealth Statistics; U.S. and State Farm Income and Wealth Statistics, updated as of February 11, 2014. a. Data for 2013 and 2014 are USDA forecasts. Change represents year-to-year projected change between 2014 and 2013. b. Includes Commodity Credit Corporation loans under the farm commodity support program. c. Government payments reflect payments made directly to all recipients in the farm sector, including landlords. The non-operator landlords’ share is offset by its inclusion in rental expenses paid to these landlords and thus is not reflected in net farm income or net cash income. d. Direct payments include production flexibility payments of the 1996 Farm Act through 2001, and fixed direct payments under the 2002 Farm Act since 2002. e. CCP = counter-cyclical payments. f. Includes loan deficiency payments (LDP); marketing loan gains (MLG); and commodity certificate exchange gains. g. Peanut quota buyout, milk income loss payments, and other miscellaneous program payments. h. Income from custom work, machine hire, agri-tourism, forest product sales, and other farm sources. i. Excludes depreciation and perquisites to hired labor. j. Gross cash income plus inventory adjustments, the value of home consumption, and the imputed rental value of operator dwellings. k. Cash expenses plus depreciation and perquisites to hired labor. CRS-27 Table 5. Average Annual Income per U.S. Household, Farm versus All, 2006-2013F ($ per household) 2006 2007 2008 2009 2010 2011 2012F 2013F Average U.S. Farm Income by Source On-Farm Income $8,541 $11,364 $9,764 $6,866 $11,788 $14,625 $22,087 $19,826 Off-Farm income $72,502 $77,432 $70,032 $70,302 $72,671 $72,665 $86,757 $89,377 Total Farm income $81,043 $88,796 $79,796 $77,169 $84,459 $87,290 $108,844 $109,203 Average U.S. Household Income Farm Household Income as Share of U.S. Avg. Household Income (%) $66,570 $67,609 $68,424 $67,976 $67,530 $69,677 $71,274 na 122% 131% 117% 114% 125% 125% 153% na Source: USDA, ERS, Farm Household Income and Characteristics, principal farm operator household finances, data set updated as of November 26, 2013; at http://www.ers.usda.gov/data-products/farm-household-income-and-characteristics.aspx. Note: Data for 2012 and 2013 are USDA forecasts. Table 6. Average Annual Farm Sector Debt-to-Asset Ratio, 2006-2014F ($ billions) 2007 2008 2009 2010 2011F 2012 2013P 2014F Farm Assets 2,055.3 2,023.3 2,139.9 2,358.5 2,529.8 2,811.3 2,929.7 3,000.9 Farm Debt 214.1 241.6 268.3 278.9 294.5 300.3 309.2 316.2 Farm Equity 1,841.2 1,781.7 1,871.5 2,079.5 2,235.4 2,510.9 2,620.5 2,684.7 Debt-to-Asset Ratio (%) 10.4% 11.9% 12.5% 11.8% 11.6% 10.7% 10.6% 10.5% Source: USDA, ERS, Farm Income and Wealth Statistics; U.S. and State Farm Income and Wealth Statistics, updated as of February 11, 2014; available at http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics.aspx. Note: Data for 2013 are preliminary, 2014 are USDA forecasts. CRS-28 Table 7. U.S. Prices and Support Rates for Selected Farm Commodities Since 2008/09 Marketing Year Commoditya Unit Year 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14Fb % change from 2012/13c 2014/15Pb % change from 2013/14d 2014 Loan Ratee 2014 Reference Price Wheat $/bu Jun-May 6.78 4.87 5.70 7.24 7.77 6.65-6.95 -12.5% — — 2.94 5.50 Corn $/bu Sep-Aug 4.06 3.55 5.18 6.22 6.89 4.20-4.80 -34.7% — 1.95 3.70 Sorghum $/bu Sep-Aug 3.20 3.22 5.02 5.99 6.33 4.00-4.80 -32.9% — 1.95 3.95 Barley $/bu Jun-May 5.37 4.66 3.86 5.35 6.43 5.85-6.25 -5.9% — 1.85 4.95 Oats $/bu Jun-May 3.15 2.02 2.52 3.49 3.89 3.55-3.85 -4.9% 1.33 2.40 Rice $/cwt Aug-Jul 16.80 14.40 12.70 14.50 15.10 15.70-16.30 6.0% 6.50 14.00 Soybeans $/bu Sep-Aug 9.97 9.59 11.30 12.50 14.40 11.95-13.45 -11.8% 5.00 8.40 Soybean oil ¢/lb Oct-Sep 32.16 35.95 53.20 51.90 47.13 34.5-37.5 -23.6% — — Soybean meal $/st Oct-Sep 331.2 311.27 345.52 393.53 468.11 425-465 -4.9% — — — — — — — Cotton, Upland ¢/lb Aug-Jul 47.8 62.9 81.50 88.3 72.5 74-78 4.8% — — — — — — — — — — 47 - 52 none Choice Steers $/cwt Jan-Dec 92.27 83.25 95.38 114.73 122.86 125.69 2.3% 132-140 8.2% — — Barrows/Gilts $/cwt Jan-Dec 47.84 41.24 55.06 66.11 60.88 64.05 5.2% 61-65 -1.6% — — Broilers ¢/lb Jan-Dec 79.7 77.60 82.90 79.0 86.6 99.7 15.1% 94-101 -2.2% — — Eggs ¢/doz Jan-Dec 128.3 103.0 106.30 115.3 117.4 124.7 6.2% 114-122 -5.4% — — Milk $/cwt Jan-Dec 18.29 12.83 16.26 20.14 18.53 20.01 8.0% 20.85-21.55 5.9% — — Source: Various USDA agency sources as described in the notes below. a. Season average farm price for grains and oilseeds are from USDA, National Agricultural Statistical Service, Agricultural Prices. Calendar year data are for the first year, for example, 2000/2001 = 2000; F = forecast and P = projection from World Agricultural Supply and Demand Estimates (WASDE) February 11, 2014;—= no value; and USDA’s out-year 2014/2015 crop price forecasts will first appear in the May 2014 WASDE report. Soybean and livestock product prices are from USDA, Agricultural Marketing Service (AMS): soybean oil—Decatur, IL, cash price, simple avg. crude; soybean meal—Decatur, IL, cash price, simple avg. 48% protein; choice steers— Nebraska, direct 1100-1300 lbs.; barrows/gilts—national base, live equivalent 51%-52% lean; broilers—wholesale, 12-city avg.; eggs—Grade A, New York, volume buyers; and milk—simple avg. of prices received by farmers for all milk. b. Data for 2013/2014 are USDA forecasts; 2014/2015 data are USDA projections. c. Percent change from 2011/2012, calculated using the difference from the midpoint of the range for 2012/2013 with the estimate for 2011/2012. d. Percent change from 2012/2013, calculated using the difference from the midpoint of the range for 2013/2014 with the estimate for 2012/2013. e. Loan rate and reference prices are for the 2014/2015 crop year. See CRS Report R43076, The 2014 Farm Bill (P.L. 113-79): Summary and Side-by-Side. CRS-29 U.S. Farm Income result of lower crop (-8%) and livestock (-5%) receipts, while production expenses are projected up less than 1%.3 U.S. agricultural exports are forecast lower for the sector in 2015 as a stronger U.S. dollar is expected to combine with struggling international economies to slow growth in demand for U.S. agricultural products. Government payments are projected up by 15% as plunging farm prices are expected to trigger $6.2 billion in payments under new price contingent programs—the Price Loss Coverage (PLC) and the Agricultural Risk Coverage (ARC) programs. The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79) eliminated direct payments of nearly $5 billion per year and replaced them with a new suite of price and revenue support programs and shallow-loss crop insurance programs.4 Total farm asset values are forecast up slightly for a sixth consecutive record high in 2015, while the debt-to-asset ratio is expected to rise slightly to 10.9%, the third-lowest level since 1960.5 These forecasts are preliminary and will depend both on crop plantings and harvests, as well as market developments. The ongoing drought in California remains of particular concern since nearly half of U.S. fruit, vegetable, and tree nut production occurs there. Also, there is some uncertainty about producer participation under the new safety net programs of the 2014 farm bill. Dairy program sign up ended in December 2014, with nearly a 50% sign-up rate; however, sign up remains open for most other price and income support programs until March 31, 2015. Selected Highlights • U.S. net farm income is forecast at $73.6 billion in 2015, a drop of over $34 billion (-32%) from 2014’s level (Figure 1 and Table 1). This represents the lowest net farm income forecast since 2009. • Measured in cash terms, net cash income in 2015 is also projected lower at $89.4 billion, down $26 billion (-22%) from the previous year. • Farm prices for most feedstuffs—feed grains (corn, sorghum, barley, and oats), hay, and protein meals—as well as soybeans declined during 2014 and are projected to continue lower in early 2015 as U.S. and global grain and oilseed stocks rebuild (Figure 3 to Figure 8). • Cattle prices remain near record highs heading into 2015, while dairy, poultry, and hog prices have turned sharply lower (Figure 9 to Figure 14). • Government payments in 2015 are projected up 15% to $12.4 billion, the highest level since 2010 (Figure 18). As a result of large declines, commodity prices are 3 The material presented in the report is drawn primarily from the 2015 Farm Sector Income Forecast of ERS, USDA, at http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/2015-farm-sector-income-forecast.aspx. 4 CRS Reports CRS Report R43448, Farm Commodity Provisions in the 2014 Farm Bill (P.L. 113-79), and CRS Report R43494, Crop Insurance Provisions in the 2014 Farm Bill (P.L. 113-79). 5 See discussion later in the report in the section “Farm Asset Values and Debt.” Congressional Research Service 3 U.S. Farm Income Outlook for 2015 expected to trigger payments of $6.2 billion under the new price-contingent PLC and ARC programs, more than offsetting the elimination of the $5-billion-peryear direct payment program by the 2014 farm bill. • Total production expenses, at $370.4 billion, are projected up less than 1% in 2015, held in check by lower costs for feed (-3%), fertilizer (-4%), fuel (-27%), and electricity (-3%). • However, replacement animal costs are projected record high in 2015 (+11%), plus higher costs for marketing, storage, and transportation costs (+6%) associated with the expected record crop harvests of 2014 are expected to carry over into 2015. • Global demand for U.S. agricultural product exports is expected to turn downward (-6%) in 2015 after setting a record of $152.5 billion in 2014. • Record farm asset values in 2015 ($3,005 billion), driven by continued strong land values, are expected to result in a sixth successive record high for farm equity ($2,678 billion). However, increases in farm debt ($327 billion) are expected to exceed asset value growth, resulting in a slight rise in the debt-toasset ratio to 10.9%, which remains low by historical standards. Outlook for U.S. Agriculture for 2015 Assuming normal weather conditions prevail in major growing regions through harvest, USDA projects that the 2015 growing period is likely to see a continued rebuilding of global grain and oilseed stocks that began with the large harvests of 2013. Rebuilding stocks will further moderate crop prices in U.S. and international markets (Figure 5 through Figure 8). The changing conditions for the livestock sector are evidenced by tracking the evolution of the ratios of livestock output prices to feed costs (Figure 13 and Figure 14), which rose steadily through 2013 before turning downward in late 2014. The ratios are projected to continue to decline into 2015.6 The U.S. cattle sector alone has a continued positive outlook in 2015—due primarily to the long biological lag in cattle production that prevents rapid herd rebuilding. Delayed supply increases are expected to support relatively high farm prices for most cattle products through 2015. In contrast, the dairy, broiler, and hog sectors have experienced rapid declines in market prices heading into 2015. This suggests lower profitability and perhaps financial difficulties for marginal producers. A key uncertainty for the hog sector in 2014 was the rapid outbreak and spread of the porcine epidemic diarrhea virus (PEDv) which caused market worries related to U.S. pork production. The incidence of PEDv this past winter has declined, and initial market fears are rapidly subsiding. The two largest U.S. commercial crops—in terms of both value and quantity—are corn and soybeans. Both corn and soybeans experienced record harvests in 2014, thus helping to rebuild stocks and pressure prices lower (Figure 3 and Figure 4). These two crops provide important inputs for domestic livestock, poultry, and biofuels sectors. In addition, the United States has traditionally been one of the world’s leading exporters of corn, soybeans, and soybean products— 6 Feed costs are generally the largest cost component in livestock operations, ranging from 30% to 80% of variable costs. A historical comparison of livestock output prices to feed costs provides an indicator of sector profitability— rising output prices relative to feed costs suggest improving profitability. Congressional Research Service 4 U.S. Farm Income Outlook for 2015 vegetable oil and meal. As a result, the outlook for these two crops is critical to both farm sector profitability and regional economic activity across large swaths of the United States, as well as in international markets. In making planting choices in the spring of 2015, farmers will likely consider both relative market prices and the potential returns from participation in government farm programs. In 2014, USDA highlighted four factors as crucial in determining how the U.S. agricultural economy will fare; these factors remain highly relevant heading into 2015: 1. global demand, which directly impacts U.S. agricultural exports—a strengthening U.S. dollar coupled with a weakening economic outlook in several major foreign importers are key uncertainties; 2. continued corn use for ethanol—lower global oil prices, implications of reaching the blend wall (maximum ethanol-to-gasoline blend ratio of 10%) in domestic fuel markets, and the lack of annual renewable fuel volume percentage standards for 2014 and 2015 under the Renewable Fuel Standard (RFS) program from the Environmental Protection Agency (EPA) are key uncertainties; 3. the new price and income support programs under the 2014 farm bill— uncertainties include the level of participation across program choices for most row crop farmers (the program choice deadline is March 31, 2015) and the extent to which program choices will impact planting decisions under the lower-price setting of 2015; and 4. the lingering drought in the West—uncertainty about the continued effects on livestock and specialty crops such as fruits, vegetables, and tree nuts, particularly in California. Congressional Research Service 5 U.S. Farm Income Outlook for 2015 Figure 3. U.S. Corn Stocks-to-Use Share to Rise, Prices to Fall in 2014 70% Stocks-to-Use Ratio $/bushel $6.89 60% Corn $8.00 $7.00 $6.00 50% $5.00 40% $4.00 $3.65 30% $3.00 20% 13.4% 7% 10% 5% $2.00 $1.00 0% $0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: See Source and Notes for Figure 4. Figure 4. U.S. Soybean Stocks-to-Use Share to Grow, Prices to Fall in 2014 35% Stocks-to-Use Ratio $/bushel $16.00 $14.40 $14.00 30% $12.00 25% $10.35 $10.00 20% $8.00 15% $6.00 10.4% 10% $4.00 5.4% 4.4% 4.6% 5% 2.7% $2.00 0% $0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: World Agricultural Outlook Board, USDA, World Agricultural Supply and Demand Estimates (WASDE), February 10, 2015. Notes: Stocks-to-Use equals the ratio of season-ending stocks relative to the season’s total usage. Congressional Research Service 6 U.S. Farm Income Outlook for 2015 Figure 5. Monthly Farm Prices for Corn, Soybeans, and Wheat, Nominal Dollars $8 $ per bu. (corn) $ per bu. (soybeans, wheat) $16 Soybeans $7 $12 $6 Corn $5 $8 $4 Wheat $3 $4 $2 $1 2003 $0 2005 2007 2009 2011 2013 2015 Source: USDA, National Agricultural Statistics Service (NASS), Agricultural Prices, January 30, 2015. Figure 6. Monthly Farm Prices for Corn, Soybeans, and Wheat, Indexed Dollars 350 Corn 300 Soybeans 250 200 Wheat 150 100 2006 = 100 50 2003 2005 2007 2009 2011 2013 2015 Source: USDA, NASS, Agricultural Prices, January 30, 2015. Notes: Prices are indexed to 2006 = 100 to permit relative comparisons. Congressional Research Service 7 U.S. Farm Income Outlook for 2015 Figure 7. Monthly Farm Prices for Cotton and Rice, Nominal Dollars $21 $100 Rice $80 $15 $60 $ per pound (cotton) $ per cwt (rice) $18 Cotton $12 $40 $9 $20 $6 $3 2003 2005 2007 2009 2011 $0 2015 2013 Source: USDA, NASS, Agricultural Prices, January 30, 2015. Notes: cwt = hundredweight or units of 100 lbs. Figure 8. Monthly Farm Prices for Cotton and Rice, Indexed Dollars 225 Rice 200 175 150 Cotton 125 100 75 2006 = 100 50 2003 2005 2007 2009 2011 2013 2015 Source: USDA, NASS, Agricultural Prices, January 30, 2015. Notes: Prices are indexed to 2006 = 100 to permit relative comparisons. Congressional Research Service 8 U.S. Farm Income Outlook for 2015 $185 $30 $160 $26 $135 $22 All Milk $110 $18 Cattle, 500+ lbs $85 $60 2003 2005 2007 2009 2011 $ per cwt (milk) $ per cwt (cattle) Figure 9. Monthly Farm Prices for All-Milk and Cattle (500+ lbs), Nominal Dollars $14 2013 $10 2015 Source: USDA, NASS, Agricultural Prices, January 30, 2015. Notes: cwt = hundredweight or units of 100 lbs; All-Milk averages prices across all classes of milk. Figure 10. Monthly Farm Prices for All-Milk and Cattle (500+ lbs), Indexed Dollars 200 180 Milk 160 140 120 Cattle, 500lb.+ 100 2006 = 100 80 2003 2005 2007 2009 2011 2013 2015 Source: USDA, NASS, Agricultural Prices January 30, 2015. Notes: Prices are indexed to 2006 = 100 to permit relative comparisons. Congressional Research Service 9 U.S. Farm Income Outlook for 2015 Figure 11. Monthly Farm Prices for All Hogs and Broilers, Nominal Dollars $100 $90 All Hogs $ per cwt $80 $70 $60 $50 Broilers $40 $30 2003 2005 2007 2009 2011 2013 2015 Source: USDA, NASS, Agricultural Prices, January 30, 2015. Notes: cwt = hundredweight or units of 100 lbs. Figure 12. Monthly Farm Prices for All Hogs and Broilers, Indexed Dollars 220 Broilers 190 All Hogs 160 130 100 2006 = 100 70 2003 2005 2007 2009 2011 2013 2015 Source: USDA, NASS, Agricultural Prices, January 30, 2015. Notes: Prices are indexed to 2006 = 100 to permit relative comparisons. Congressional Research Service 10 U.S. Farm Income Outlook for 2015 Figure 13. The Milk-to-Feed Margin Fell Sharply in Late 2014 (National average farm-price received of milk less average feed costs per 100 lbs) $18 $/cwt. $15 $12 $9 $6 $3 $0 2000 2002 2004 2006 2008 2010 2012 2014 Source: USDA, NASS, Agricultural Prices, January 30, 2015; calculations by CRS. Note: For pricing dairy feed, USDA uses 51% corn, 8% soybeans, and 41% alfalfa. Figure 14. The Farm-Price-to-Feed Ratios Turned Unfavorable for Livestock in 2014 (Ratio of national average farm-price received per 100 lbs of meat to per-unit feed cost) 60 9 Steers & Heifers 500+ lbs 50 40 6 Broilers (right axis) 30 20 3 10 Hogs 0 2002 0 2004 2006 2008 2010 2012 2014 Source: USDA, NASS, Agricultural Prices, January 30, 2015. Notes: Cattle and hog feed cost is 100% corn; broilers feed cost is 58% corn, 42% soybeans. Congressional Research Service 11 U.S. Farm Income Outlook for 2015 Figure 15. Farm Cash Receipts by Source, 1990 to 2015F $500 Government Payments $400 Farm-Related Income $300 $200 Livestock Product Receipts $100 Crop Receipts $0 1990 1995 2000 2005 2010 2015 Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary, 2015 is forecast. Notes: Receipts from crop and livestock product sales, and government payments, are described in more detail below. Farm-related income includes income from custom work, machine hire, agri-tourism, forest product sales, insurance indemnities, and cooperative patronage dividend fees. 2015 Forecast Cash Receipt Highlights • Total farm sector gross cash receipts for 2015 are projected down 6% from the previous year’s record of $407.4 billion (Figure 15), driven by lower cash receipts for both crop (-8%) and livestock products (-5%). • Farm sector revenue sources and shares include crop revenues (44% of sector revenues), livestock receipts (47%), government payments (about 2%), and other farm-related income, including crop insurance indemnities, machine hire, and custom work (6%). Congressional Research Service 12 U.S. Farm Income Outlook for 2015 Figure 16. Crop Cash Receipts by Source, 2007 to 2015F $250 Other Cotton $200 Fruit & Vegs $150 Food crops Oil crops $100 Feed crops $50 $0 2007 2008 2009 2010 2011 2012 2013 2014F 2015F Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary; 2015 is forecast. Crop Receipts Total crop sales peaked in 2012 at a record $236.1 billion when a nationwide drought pushed commodity prices to record or near-record levels. In 2015, crop sales are projected down 8% from 2014, at $182.6 billion (Figure 15). The crop sector includes 2015 projections (and percentage changes from 2014) for: • feed crops—corn, barley, oats, sorghum, and hay—of $58.7 billion (-11%); • oil crops—soybeans, peanuts, and other minor oilseeds—of $38.4 billion (-6%); • food grains—wheat and rice—of $14 billion (-12%); • fruits and nuts, vegetables, and melons of $42.6 billion (-9%); • cotton of $5.7 billion (-5%); and • all other crops—including tobacco, sugar, green house, and nursery crops—of a record $23.8 billion (+1%). The length and severity of the California drought (which remains ongoing in early 2015) has important national implications for retail food prices—California accounts for about one-third of U.S. vegetable production, almost two-thirds of U.S. fruit and nut production, about 20% of U.S. milk, and a substantial portion of wine production. Congressional Research Service 13 U.S. Farm Income Outlook for 2015 Figure 17. U.S. Livestock Product Cash Receipts by Source, 2007 to 2015F $210 Other $180 Dairy $150 Poultry & Eggs $120 Hogs $90 $60 Cattle & calves $30 $0 2007 2008 2009 2010 2011 2012 2013 2014F 2015F Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary; 2015 is forecast. Livestock Receipts The livestock sector, broadly defined, includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector have grown steadily since the severe downturn of 2009. However, they are projected to turn downward again in 2015 to $199 billion, down about 5% from the previous year’s record, driven largely by projected declines in dairy (-22%) and hogs (-14%). In contrast, cattle receipts are projected record large (+5%). Poultry and egg receipts are projected down slightly (-1%). Highlights for individual activities include projections for: • record cattle and calf sales of over $85.9 billion (+5%); • hog sales of $21.8 billion, down 14% from 2014’s record; • poultry and egg sales of $47.3 billion, down slightly (-0.5%) from the previous year’s record; and • dairy sales, valued at $38.2 billion, down 22% year to year on the outlook for sharply lower milk prices in 2015. Congressional Research Service 14 U.S. Farm Income Outlook for 2015 Figure 18. U.S. Government Farm Support, Direct Outlays, 1997 to 2015F $25 All Other Ad Hoc and Emergency $20 Conservation Price Contingent Direct Payments $15 $10 $5 $0 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015F Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary; 2015 is forecast. Notes: Data are on a fiscal year basis and may not correspond exactly with the crop or calendar year. “Direct Payments” include production flexibility contract payments enacted under the 1996 farm bill and fixed direct payments of the 2002 and 2008 farm bills; “Price-Contingent” outlays include loan deficiency payments, marketing loan gains, counter-cyclical payments and ACRE payments; “Conservation” outlays include Conservation Reserve Program payments along with other conservation program outlays; “Ad Hoc and Emergency” includes emergency supplemental crop and livestock disaster payments and market loss assistance payments for relief of low commodity prices; and “All Other” outlays include peanut quota buyout payments, milk income loss payments, tobacco transition payments, and other miscellaneous expenditures. Government Payments Government payments in 2015 are projected up by 15% from 2014 as plunging farm prices are expected to trigger payments under new price-contingent programs—the Price Loss Coverage (PLC) and the Agricultural Risk Coverage (ARC) programs. The 2014 farm bill (Agricultural Act of 2014; P.L. 113-79) eliminated direct payments of nearly $5 billion per year and replaced them with a new suite of price and revenue support programs. In particular, the PLC program replaced the previous Counter-Cyclical Price (CCP) program, but with a set of reference prices based on substantially higher support levels for most program crops. ARC relies on a five-year moving average price trigger in its payment calculation but also adopts the PLC reference price as the minimum guarantee in years when market prices fall below it. These higher relative support levels are expected to trigger payments of $6.2 billion in 2015 (Figure 18). • Government payments of $12.4 billion are expected to represent a relatively small share (3%) of projected gross cash income of $421 billion (Figure 15). • In contrast, government payments are expected to represent 17% of net farm income of $73.6 billion; however, the importance of government payments as a Congressional Research Service 15 U.S. Farm Income Outlook for 2015 percent of net farm income varies nationally by crop and livestock sector and region. • Farm fixed direct payments, whose payment rates were fixed in previous legislation, were eliminated by the 2014 farm bill.7 • Cotton producers are eligible to receive transition payments (new under the 2014 farm bill) for crop years 2014 and 2015 as they transition into coverage authorized by the new Stacked Income Protection Plan (STAX).8 Fixed by legislation, these cotton transition payments are forecast at $683 million in 2014 and $68 million in 2015. • Payments under the price-contingent marketing loan benefit are forecast at $196 million in 2014 and $374 million in 2015, as program crop prices are expected to remain above most program loan rates—the exception being rice and peanuts (Table 4). • Payments under the Average Crop Revenue (ACRE) program for 2014 (that will go out in 2015) are forecast at $29 million. • Although still available in 2014 on a transitional basis, no payments are expected to be made in 2015 under the Milk Income Loss Contract payments—which compensate dairy producers when domestic milk prices fall below a specified benchmark price subject to feed-cost adjustments—due to high milk prices and relatively low feed costs. • Conservation programs include all conservation programs operated by USDA’s Farm Service Agency (FSA) and the Natural Resources Conservation Service (NRCS) that provide direct payments to producers. Estimated conservation payments of $4.3 billion are forecast for 2015, up slightly from 2014. • Supplemental and ad-hoc disaster assistance payments are forecast at $1.4 billion in 2015, a 72% decline from $5.4 billion in 2014. The continuing drought in California and the Southern Plains is expected to maintain some payouts, especially from the Livestock Forage Program (LFP).9 Livestock producers are eligible to receive payments under the Livestock Forage Program (LFP) and the Livestock Indemnity Program (LIP) retroactive to FY2012. Payments under these two programs are for multiple years, mostly covering losses (feed expenses) incurred during the 2012 drought. Some Noninsured Assistance Program payments also are expected to be made to livestock and specialty crop producers for whom no commodity insurance program is available. 7 For details see CRS Report R43076, The 2014 Farm Bill (P.L. 113-79): Summary and Side-by-Side. Ibid. 9 See CRS Report RS21212, Agricultural Disaster Assistance, for more information on available farm disaster programs. 8 Congressional Research Service 16 U.S. Farm Income Outlook for 2015 Figure 19. Farm Production Expenses by Source, 2007 to 2015F $400 Other Rent to Non-Operator Landlord $300 Interest Hired Labor Depreciation $200 Manufactured inputs Other operating costs $100 Farm origin inputs $0 2007 2008 2009 2010 2011 2012 2013 2014F 2015F Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary; 2015 is forecast. Notes: “Other operating costs” includes crop insurance premiums, contract labor, machine hire and custom work, marketing, storage, and transportation, and repair and maintenance. “Other” includes property taxes, noncash labor perquisites, and miscellaneous cost items. Production Expenses Production expenses for 2015 for the U.S. agricultural sector are projected up slightly (+0.7%) at $370.4 billion (Figure 19). The increase in expenses will affect crop and livestock farms differently. • The principal expenses for livestock farms—that is, feed and feeder animals and poultry—are expected to move in opposite directions, as feed costs decline by about 3% while replacement animal costs rise by nearly 23%. In the net, the principal livestock expenses are forecast up 4% from 2014 at $94 billion. • In contrast, the principal crop expenses—that is, seed, fertilizer, pesticides, and crop insurance premiums—are forecast up by nearly 5% to $104 billion. Miscellaneous operating expenses, which are projected up 3.6% to $38.2 billion, include crop insurance premiums and thus directly impact crop production. Cash rental rates—which were set the preceding fall of 2014 or in early spring of 2015—still reflect the high prices and large net returns of the preceding several years and have yet to decline substantially (Figure 20). Some anecdotal reports of lower rental rates have appeared sporadically in the news; however, new USDA rental rate estimates for 2015 will not be reported until April. In the interim, USDA projects that total net rent to non-operator landlords will be down about 6%, largely due to the decrease in corn plantings. However, continued high per-acre Congressional Research Service 17 U.S. Farm Income Outlook for 2015 cash rental rates may cause a pinch in cash flow for some farm operations, particularly if livestock product prices for hogs, poultry, eggs, and dairy continue to decline into 2015. Figure 20. U.S. Average Farm Land Cash Rental Rates Since 1999 $150 $ per Acre $120 Cropland $90 $60 $30 Pasture $0 1999 2002 2005 2008 2011 2014 Source: USDA, NASS, “Quick Stats,” downloaded August 25, 2014. Agricultural Trade Outlook A major catalyst behind the strong farm income of recent years has been the strength of U.S. agricultural exports, which have shown remarkable growth since 2000, nearly tripling in value. However, agricultural exports are projected lower in 2015, down 6% from last year’s record $152.5 billion (Figure 21). In contrast, U.S. agricultural imports are projected record-large in 2015 at $116 billion, up 6% year to year. As a result the U.S. agricultural trade surplus is projected to be down sharply (-37%) in 2015 at $27 billion. • • In 2015, the early outlook is for a slight fallback in exports to $143.5 billion, still the second-highest total on record. The top three markets for U.S. agricultural exports are China, Canada, and Mexico. Together these three countries are expected to account for 48% of total U.S. agricultural exports in FY2015 (Figure 22). Congressional Research Service 18 U.S. Farm Income Outlook for 2015 10 • A substantial portion of the increase in U.S. agricultural exports since 2010 has also been due to higher-priced grain and feed shipments, plus record oilseed exports to China and growing animal product exports to East Asia.10 • The fourth- and fifth-largest U.S. export markets are Japan and the European Union (EU), which are projected to account for a combined 18% of U.S. agricultural exports in FY2015. Although important as major buyers of U.S. agricultural products, these two markets have shown relatively limited growth when compared with the rest of the world. • The “Rest of World” component of U.S. trade includes Middle Eastern, African, and Southeast Asian markets that have shown dramatic import growth of U.S. agricultural products in recent years. • Over the past four decades, steady growth in high-valued export products (Figure 23) has helped to push U.S. agricultural export value to ever higher totals. This pattern plateaued temporarily in 2006, when rapid growth in demand from both international commodity markets and domestic biofuels pushed prices for most bulk crops (especially feed grains and oilseeds) to record levels. As grain and oilseed prices recede, so will the bulk value share of U.S. exports. • Bulk commodity shipments (primarily wheat, rice, feed grains, soybeans, cotton, and unmanufactured tobacco) are forecast at a record low 30% share of total U.S. agricultural exports in 2015, at $43 billion. • In contrast, high-valued export products—including horticultural, livestock, poultry, and dairy—are forecast at $100.6 billion in 2015. • As a share of total gross farm receipts, U.S. agricultural exports are projected to account for 32% of earnings in 2015, same as in 2014 (Figure 24). USDA, ERS, Outlook for U.S. Agricultural Trade, AES-84, December 2, 2014. Congressional Research Service 19 U.S. Farm Income Outlook for 2015 Figure 21. U.S. Agricultural Trade Since 1970 $150 Exports $120 $90 $60 Imports $30 Trade Surplus $0 1970 1980 1990 2000 2010 Source: USDA, ERS, Outlook for U.S. Agricultural Trade, AES-84, December 2, 2014; 2014 is an estimate; 2015 is a projection. Figure 22. U.S. Agricultural Exports Have Surged Higher Since 2006, Driven by China, NAFTA Partners (Canada and Mexico), and Developing Countries $150 China $ Billion $125 Mexico $100 Canada $75 $50 Rest of World $25 EU Japan $0 1967 1977 1987 1997 2007 Source: USDA, ERS, Outlook for U.S. Agricultural Trade, AES-84, December 2, 2014; 2014 is an estimate; 2015 is a projection. Congressional Research Service 20 U.S. Farm Income Outlook for 2015 Figure 23. U.S. Agricultural Trade: Bulk vs. High-Value Shares 100% 80% 60% High-Value 40% 20% Bulk 0% 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: USDA, ERS, Outlook for U.S. Agricultural Trade, AES-84, December 2, 2014; 2014 is an estimate; 2015 is a projection. Figure 24. U.S. Agricultural Export Value as Share of Gross Cash Income 40% U.S. Agricultural Exports as Share of Total Gross Farm Income 30% 20% 10% 0% 1935 1945 1955 1965 1975 1985 1995 2005 2015 Source: USDA, ERS, Outlook for U.S. Agricultural Trade, AES-84, December 2, 2014; 2014 is an estimate; 2015 is a projection. Congressional Research Service 21 U.S. Farm Income Outlook for 2015 Farm Asset Values and Debt The U.S. farm income and asset-value situation and outlook suggest a relatively strong financial position heading into 2015 for the agriculture sector as a whole, but with considerable uncertainty regarding the downward outlook for prices and market conditions for the sector. Measuring Farm Wealth A useful measure of the farm sector’s financial wherewithal is farm sector net worth as measured by farm assets minus farm debt. A summary statistic that captures this relationship is the debt-to-asset ratio. Farm Assets include both physical and financial farm assets. Physical Assets include land and buildings, farm equipment, on-farm inventories of crops and livestock, and other miscellaneous farm assets. Financial Assets include cash, bank accounts, and investments such as stocks and bonds. Farm Debt includes both business and consumer debt linked to real estate and non-real estate assets (e.g., financial assets, inventories of agricultural products, and the value of machinery and motor vehicles) of the farm sector. The Debt-to-Asset Ratio compares the farm sector’s outstanding debt related to farm operations relative to the value of the sector’s aggregate assets. Change in the debt-to-asset ratio is a critical barometer of the farm sector’s financial performance with lower values indicating greater financial resiliency. A smaller debt-to-asset ratio suggests that the sector is better able to withstand short-term increases in debt related to interest rate fluctuations or changes in the revenue stream related to lower output prices, higher input prices, or production shortfalls. The largest single component in a typical farmer’s investment portfolio is farmland. As a result, real estate values affect the financial well-being of agricultural producers and serve as the principal source of collateral for farm loans. • Farm asset values—which reflect farm investors’ and lenders’ expectations about long-term profitability of farm sector investments—are projected up slightly (0.4%) in 2015 to $3,005 billion, reflecting a leveling off of the previous year’s strong outlook for the general farm economy (Table 3). • Continued strong farm asset values are expected despite weaker farm real estate values, projected down 0.8% (Figure 25 and Figure 26). Real estate traditionally accounts for the bulk of total value of farm sector assets. All other farm asset values are projected up 5.4%, thus offsetting the pessimistic outlook for farm real estate. • Despite the projected decline in 2015, farm real estate values have grown by an estimated 41% since 2009, due largely to strong crop prices. In 2015, real estate assets are expected to account for nearly 82% of total farm assets. • Land value growth is closely linked to commodity prices and is expected to plateau or recede slightly if the forecasts for lower commodity prices and the prospect for continued global stock recovery for grains and oilseeds are realized in 2015 and beyond. • Meanwhile, total farm debt is forecast to rise to $327.4 billion in 2015 (up 3%). • Farm equity (or net worth, defined as asset value minus debt) is projected to be up marginally at a record high of $2,678 billion in 2015. • The farm debt-to-asset ratio is forecast at 10.9% in 2015, up slightly from the preceding two years, but still the third lowest level on record (Figure 27). Congressional Research Service 22 U.S. Farm Income Outlook for 2015 Figure 25. U.S. Average Farm Land Values, 1985 to 2014F $5,000 $ per Acre $4,000 Cropland $3,000 $2,000 $1,000 Farm Real Estate Pasture $0 1985 1990 1995 2000 2005 2010 Source: USDA, NASS, Land Values 2014 Summary, August 2014; 2014 is a forecast. Notes: Farm real estate value measures the value of all land and buildings on farms. Cropland and pasture values are only available since 1998. Figure 26. Real Estate Assets Comprise 81% of Total Farm Sector Assets in 2015 $3 $ Trillion $2 All Other Assets $1 Real Estate $0 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary; 2015 is forecast. Notes: Non-real estate assets include financial assets, inventories of agricultural products, and the value of machinery and motor vehicles. Congressional Research Service 23 U.S. Farm Income Outlook for 2015 Figure 27. U.S. Farm Debt-to-Asset Ratio Since 1960 25% 20% 15% Farm Debt-to-Asset Ratio 10% 5% 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary; 2015 is forecast. Average Farm Household Income Farm household wealth is derived from a variety of sources.11 A farm can have both an on-farm and an off-farm component to its balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because there are other stakeholders in farming, such as landlords and contractors, and because farm operator households often have nonfarm investments, jobs, and other links to the nonfarm economy. On-Farm vs. Off-Farm Income Shares • Average farm household income (sum of on- and off-farm income) is projected at $113,251 (down 2%) in 2015 (Table 2), with about $15,850 coming from the farm and the remaining $97,400 earned off the farm (including financial investments). • The share of farm income derived from off-farm sources had increased steadily for decades but peaked at about 95% in 2002. In 2015, off-farm income is 11 USDA, ERS, “Farm Household Well-Being,” online webpage accessed on February 13, 2015, at http://www.ers.usda.gov/topics/farm-economy/farm-household-well-being.aspx. Congressional Research Service 24 U.S. Farm Income Outlook for 2015 forecasted to account for 86% of the national average farm household income, compared with 14% from farming activities (Figure 28). Figure 28. U.S. Average Farm Household Income, by Source, Since 1960 $120,000 $100,000 $80,000 $60,000 $40,000 Off-Farm $20,000 On-Farm $0 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary; 2015 is forecast. U.S. Total vs. Farm Household Average Income • Since the late 1990s, farm household incomes have surged ahead of average U.S. household incomes (Figure 29 and Figure 30). • In 2013 (the last year for which comparable data were available), the average farm household income of $118,373 was about 63% higher than the average U.S. household income of $72,641 (Table 2). Congressional Research Service 25 U.S. Farm Income Outlook for 2015 Figure 29. U.S. Farm Household Incomes Have Surged Well Above Average Household Income Since 1996 $120,000 Average Farm Household Income $100,000 $80,000 $60,000 Average U.S. Household Income $40,000 $20,000 $0 1960 1970 1980 1990 2000 2010 Source: USDA, ERS, “2015 Farm Income Forecast,” February 10, 2015. All values are in nominal terms, that is, not adjusted for inflation. 2014 is preliminary; 2015 is forecast. Figure 30. U.S. Farm vs. Average Household Incomes Expressed as a Ratio 175% 150% 125% 100% 75% Ratio of Farm to U.S. Average Household Income 50% 1960 1970 1980 1990 2000 2010 Source: See above source note. 2013 is the last year with comparable data. Congressional Research Service 26 Table 1. Annual U.S. Farm Income Since 2008 ($ billions) Item 2008 2009 2010 2011 2012 2013 2014a 2015a Change (%) 1. Cash receipts 316.4 289.1 322.2 368.7 404.8 401.3 407.4 381.6 -6.3% Cropsb Livestock 2. Government paymentsc 174.8 141.6 12.2 168.9 120.3 12.2 182.1 140.1 12.4 204.7 163.9 10.4 236.1 168.7 10.6 218.5 182.8 11.0 198.2 209.2 10.8 182.6 199.0 12.4 -7.9% -4.9% 15.0% 5.1 0.7 0.3 3.2 2.1 0.8 21.5 4.7 1.2 1.1 2.8 0.6 1.7 22.0 4.8 0.2 0.1 3.5 3.1 0.7 18.3 4.7 0.0 0.0 3.7 1.3 0.7 26.1 4.7 0.0 0.0 3.7 1.1 1.1 28.5 4.3 0.0 0.0 3.7 1.9 0.9 31.5 0.5 0.0 0.2 4.2 5.1 0.6 27.3 0.1 6.2 0.4 4.3 1.4 0.0 27.3 — — — — — — 0.0% 4. Gross cash income (1+2+3) 5. Cash expensesj 6. NET CASH INCOME 350.1 262.1 88.1 323.3 249.4 73.9 352.8 253.9 98.9 405.2 277.7 127.5 443.9 306.8 137.1 443.9 312.7 131.1 445.5 330.3 115.1 421.3 332.0 89.4 -5.4% 0.5% -22.4% 7. Total gross revenuesk 8. Total production expensesl 9. NET FARM INCOME 377.6 294.0 83.6 343.2 283.0 60.3 366.6 287.5 79.1 426.3 312.5 113.8 445.0 342.3 102.5 481.0 352.0 129.0 475.9 367.9 108.0 444.0 370.4 73.6 -6.7% 0.7% -31.8% paymentsd Fixed direct CCP-PLC-ARCe Marketing loan benefitsf Conservation Ad hoc and emergencyg All otherh 3. Farm-related incomei Source: USDA, ERS, Farm Income and Wealth Statistics; U.S. and State Farm Income and Wealth Statistics, updated as of February 10, 2015. a. Data for 2014 and 2015 are USDA forecasts. Change represents year-to-year projected change between 2015 and 2014. b. Includes Commodity Credit Corporation loans under the farm commodity support program. c. Government payments reflect payments made directly to all recipients in the farm sector, including landlords. The non-operator landlords’ share is offset by its inclusion in rental expenses paid to these landlords and thus is not reflected in net farm income or net cash income. d. Direct payments include production flexibility payments of the 1996 Farm Act through 2001, and fixed direct payments under the 2002 Farm Act since 2002. e. CCP = counter-cyclical payments; PLC = Price Loss Coverage; and ARC = Agricultural Risk Coverage. f. Includes loan deficiency payments (LDP); marketing loan gains (MLG); and commodity certificate exchange gains. g. Includes payments made under the ACRE program which was eliminated by the 2014 farm bill (P.L. 113-79). h. i. j. k. l. CRS-27 Peanut quota buyout, milk income loss payments, and other miscellaneous program payments. Income from custom work, machine hire, agri-tourism, forest product sales, and other farm sources. Excludes depreciation and perquisites to hired labor. Gross cash income plus inventory adjustments, the value of home consumption, and the imputed rental value of operator dwellings. Cash expenses plus depreciation and perquisites to hired labor. Table 2. Average Annual Income per U.S. Household, Farm Versus All, 2008-2015F ($ per household) 2008 2009 2010 2011 2012 2013 2014F 2015F Average U.S. Farm Income by Source On-farm income $9,764 $6,866 $11,788 $14,625 $25,965 $27,897 $21,869 $15,908 Off-farm income $70,032 $70,302 $72,671 $72,665 $86,482 $90,476 $93,601 $97,343 Total farm income $79,796 $77,169 $84,459 $87,290 $112,447 $118,373 $115,470 $113,251 Average U.S. Household Income $68,424 $67,976 $67,530 $69,677 $71,274 $72,641 na na Farm Household Income as Share of U.S. Avg. Household Income (%) 117% 114% 125% 125% 158% 163% na na Source: USDA, ERS, Farm Household Income and Characteristics, principal farm operator household finances, data set updated as of February 10, 2015; at http://www.ers.usda.gov/data-products/farm-household-income-and-characteristics.aspx. Note: Data for 2014 and 2015 are USDA forecasts. Table 3. Average Annual Farm Sector Debt-to-Asset Ratio, 2008-2015F ($ billions) Farm Assets Farm Debt Farm Equity Debt-to-Asset Ratio (%) 2008 2009 2010 2011 2,154.0 2,131.5 2,313.2 2,478.0 261.1 268.3 278.9 1,893.0 1,863.1 2,034.3 12.1% 12.6% 12.1% 2013 2014F 2,734.4 2,886.5 2,994.0 3,005.1 294.5 300.3 308.2 317.7 327.4 2,183.6 2,434.1 2,578.3 2,676.3 2,677.7 11.9% 2012 11.0% 10.7% 10.6% Source: USDA, ERS, Farm Income and Wealth Statistics; U.S. and State Farm Income and Wealth Statistics, updated as of February 10, 2015; available at http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics.aspx. Note: Data for 2014 are preliminary; 2015 are USDA forecasts. CRS-28 2015F 10.9% Table 4. U.S. Prices and Support Rates for Selected Farm Commodities Since 2009/10 Marketing Year Commoditya Unit Year 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15Fb % Change from 2013/14c 2015/16Pb % Change from 2014/15d 2015 Loan Ratee 2015 Reference Price Wheat $/bu Jun-May 4.87 5.70 7.24 7.77 6.87 5.85-6.15 -12.7% — — 2.94 5.50 Corn $/bu Sep-Aug 3.55 5.18 6.22 6.89 4.46 3.40-3.90 -18.2% — 1.95 3.70 Sorghum $/bu Sep-Aug 3.22 5.02 5.99 6.33 4.28 3.55-4.05 -11.2% — 1.95 3.95 Barley $/bu Jun-May 4.66 3.86 5.35 6.43 6.06 5.05-5.45 -13.4% — 1.85 4.95 Oats $/bu Jun-May 2.02 2.52 3.49 3.89 3.75 3.10-3.40 -13.3% 1.33 2.40 Rice $/cwt Aug-Jul 14.40 12.70 14.50 15.10 16.10 13.70-14.30 -13.0% 6.50 14.00 Soybeans $/bu Sep-Aug 9.59 11.30 12.50 14.40 13.00 9.45-10.95 -21.5% 5.00 8.40 Soybean Oil ¢/lb Oct-Sep 35.95 53.20 51.90 47.13 38.23 30-34 -26.8% — — Soybean Meal $/st Oct-Sep 311.27 345.52 393.53 468.11 489.94 350-390 -24.5% — — — — — — — Cotton, Upland ¢/lb Aug-Jul 62.9 81.50 88.3 72.5 77.9 59-63 -21.7% — — — — — — — — — — 47-52 none Choice Steers $/cwt Jan-Dec 83.25 95.38 114.73 122.86 125.89 154.56 22.8% 157-167 4.8% — — Barrows/Gilts $/cwt Jan-Dec 41.24 55.06 66.11 60.88 64.05 76.03 18.7% 54-58 -26.3% — — Broilers ¢/lb Jan-Dec 77.60 82.90 79.0 86.6 99.7 104.9 5.2% 97-103 -4.7% — — Eggs ¢/doz Jan-Dec 103.0 106.30 115.3 117.4 124.7 142.3 14.1% 125-134 -9.0% — — Milk $/cwt Jan-Dec 12.83 16.26 20.14 18.53 20.05 23.98 19.6% 17.40-18.10 -26.0% — — Source: Various USDA agency sources as described in the notes below. a. Season average farm price for grains and oilseeds are from USDA, National Agricultural Statistical Service, Agricultural Prices. Calendar year data are for the first year, for example, 2000/2001 = 2000; F = forecast and P = projection from World Agricultural Supply and Demand Estimates (WASDE) February 10, 2015;—= no value; and USDA’s out-year 2015/2016 crop price forecasts will first appear in the May 2015 WASDE report. Soybean and livestock product prices are from USDA, Agricultural Marketing Service (AMS): soybean oil—Decatur, IL, cash price, simple average crude; soybean meal—Decatur, IL, cash price, simple average 48% protein; choice steers—Nebraska, direct 1100-1300 lbs; barrows/gilts—national base, live equivalent 51%-52% lean; broilers—wholesale, 12-city average; eggs—Grade A, New York, volume buyers; and milk—simple average of prices received by farmers for all milk. b. Data for 2014/2015 are USDA forecasts; 2015/2016 data are USDA projections. c. Percent change from 2013/2014, calculated using the difference from the midpoint of the range for 2014/2015 with the estimate for 2013/2014. d. Percent change from 2014/2015, calculated using the difference from the midpoint of the range for 2015/2016 with the estimate for 2014/2015. e. Loan rate and reference prices are for the 2014/2015 crop year. See CRS Report R43076, The 2014 Farm Bill (P.L. 113-79): Summary and Side-by-Side. CRS-29 U.S. Farm Income Outlook for 2015 Author Contact Information Randy Schnepf Specialist in Agricultural Policy rschnepf@crs.loc.gov, 7-4277 Congressional Research Service 30