Given low prices for farm products, it’s not surprising to see that government payments are expected to rise in 2015: $11.4 billion, an increase of 16.3% compared to a year ago . Plentiful surpluses are flooding once tight markets, pushing prices lower. The USDA earlier this month estimated that the nation’s corn crop will reach 13.7 billion bushels, the third-largest crop in U.S. history.
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Added Fisher, “That said, the strength in the cycle in recent years may cause the high-horsepower decline to be worse than the correlation suggests, and equipment declines have been more than twice as steep as the declines in cash receipts in 3 of the past 4 downturns”. “The past several years have seen unprecedented highs in farm income, and despite the fact that farm income is forecast to be down from record levels, today’s projections provide a snapshot of a rural America that continues to remain stable and resilient”.
Despite the sharp decline, U.S. Agriculture Secretary Tom Vilsack called the forecast “heartening”.
This year, futures prices for corn already have fallen 7% since the end of 2014, while soybean prices are down almost 12% and trading at the lowest levels in about six years.
With ample grain supplies and concerns over demand for U.S. crops weighing on prices, the USDA on Tuesday projected that annual crop receipts would fall to $195 billion this year from $207.9 billion last year. He noted the United States this year suffered its worst-ever animal disease outbreak with bird flu in poultry, and has grappled with severe drought in the West.
Government forecasters expect a 29% drop in dairy receipts in 2015, as well as a 27% decline for hogs.
“There’s a lot of reasons why there’s not comparability to what occurred in the 1980s”, Morehart said.
The USDA revised lower its February estimate for a 32% decline in farm income, mainly due to a diminished outlook for livestock farmers. Expenses are forecast to increase for labor, interest, and property taxes. Using the government’s forecast, he said it “suggests high-horsepower retail sales may decline 15.1 percent in 2015”.
“The balance sheet remains very financially sound”, he said.
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USDA economist Mitchell Morehart says lower commodity prices and current land values and production expenses make the most recent forecast bleaker than government estimates from last spring. Still, he said farmers are increasingly less likely to hold on to their fall harvest and instead sell it this year to gain income to help “keep their cash flow strong”.
