American Farm Bureau Federation – The U.S. economy continues to outperform expectations. Year-over-year growth in gross domestic product has been positive for 36 consecutive quarters, unemployment is the lowest in nearly 50 years and inflation remains mostly flat (U.S. GDP Growth Continues Impressive Run). While the U.S. economy roars along, the farm economy continues to struggle. USDA’s most recent Farm Sector Income Forecast revealed that net farm income in 2018, a broad measure of farm profitability, is projected at $66.3 billion, down 12 percent from prior-year levels. After adjusting for inflation, net farm income in 2018 is projected to be at the third lowest-level in more than two decades.
A variety of factors influence net farm income. Lower commodity prices drive profitability down, but higher yields can somewhat offset the effect of lower commodity prices. Higher costs obviously reduce profitability. Today’s article reviews the end-of-year projections for cash receipts, expenses and net farm income in 2018.
Cash Receipts Flat in 2018
Driven by higher cash-related farm income, ad hoc disaster assistance and trade-based market facilitation program payments, as well as higher-than-anticipated crop yields and record production of many livestock-related products such as milk, pork and beef, gross agricultural cash receipts in 2018 are projected at $423 billion, up 1.5 percent, or $6.3 billion, from prior-year levels. If realized, this total would be $10 billion below the 10-year average and $47.5 billion below 2013’s record high. When adjusted for inflation, gross cash receipts are down 0.8 percent, $22 billion below the 10-year average and nearly $80 billion less than the record $501 billion in 2014.
A majority, or 47 percent, of gross cash receipts in 2018 come from crop production. Cash receipts for crops in 2018 are projected at $199.2 billion, up 1.5 percent, or nearly $3 billion, from 2017 and in line with the 10-year average. Nearly 42 percent of cash receipts are projected to come from livestock and livestock product production. Cash receipts in livestock are projected at $175.6 billion in 2018, down 0.2 percent, or $400 million, from 2017 levels. This is slightly higher than the 10-year average of $169.5 billion. When adjusted for inflation, however, cash receipts for both crops and livestock are down from prior-year levels at -0.8 percent and -2.5 percent, respectively.