Farm Business Net Cash Income Forecast To Decline in 2015
- Average net cash income for farm businesses is expected to decline 22.7 percent in 2015, retreating to a similar level as in 2010-11.
- Farm businesses that specialize in livestock are forecast to experience declines in average net cash income in 2015 following significant increases in 2014. These decreases are due to lower prices for most livestock products.
- Farm businesses specializing in all tracked crops are forecast to experience a second year of declines in average net cash income, with the third consecutive year of declines for specialty crop and other field crop farms.
- Farm businesses are expected to see reduced costs for many major expense categories, including feed, fuel, and fertilizer costs. Cash expenses are expected to decrease about 1 percent, on average, in 2015.
The forecast average net cash farm income (NCFI) of $79,200 for all farm businesses* in 2015, a decline of 22.7 percent from 2014 (see table), is in line with the sectorwide forecast decline for NCFI, which represents the amount of cash available to service debt, pay family living expenses, and make investments. It is not a comprehensive measure of profitability, however, since it does not account for changes in inventory, accounts payable, accounts receivable, and depreciation.
After expected record production in 2014, production of program crops is expected to decrease in 2015, with lower prices. As a result, farm businesses specializing in crops eligible for farm commodity program payments are forecast to experience significant declines in average NCFI in 2015. Crop receipts are forecast to decline 8-10 percent, on average, in 2015 for farm businesses specializing in wheat, corn, soybeans, and peanuts.
Specialty crop farm businesses (fruits, vegetables, and nursery/greenhouse) are forecast to experience a decrease in average NCFI of 18 percent in 2015, following an expected 31-percent drop in 2014. Specialty crop receipts are forecast to decrease by about 5 percent in 2015, largely due to fruit and vegetable prices continuing to decline after increases in 2011-13. Labor expenses, which make up 40 percent of all cash expenses for specialty crop farms, are forecast to increase 4 percent due to higher wages. Total cash expenses are forecast to increase by about 6 percent for specialty crop farm businesses.
Average NCFI forecasts for farm businesses specializing in livestock production are expected to decline in 2015, but remain higher than in 2013. After several years of increasing expenses through 2013, livestock farm businesses across all specializations are expected to benefit from a second year of declining (-2.7 percent) feed costs. Feed expenses make up 44 percent of cash expenses for dairy, 28 percent for hog, 29 percent for poultry, and 18 percent for beef cattle farm businesses, on average.
After an expected 74-percent increase in average NCFI in 2014, farm businesses specializing in dairy are expected to return to levels similar to 2013. Cattle receipts are forecast higher in 2015 due to higher prices for cattle and calves. However, this gain does not compensate for higher production costs driven by increased livestock purchases, leading to an expected 10-percent decrease in the average NCFI for beef cattle farm businesses in 2015. Large decreases in hog receipts and crop receipts, coupled with increasing livestock purchase expenses, lead to a forecast decline in NCFI of 30 percent for hog farm businesses in 2015. Lower marketing contract receipts and higher livestock purchase expenses drive the average NCFI forecast for poultry and egg farm businesses down over 19 percent from 2014.
Average NCFI is forecast to decline in 2015 for all crop and livestock specializations; however, regional performance is expected to vary considerably. Differences in average farm business performance across regions (see more on the ERS resource regions) are largely driven by production specialization.
- Farm businesses in the Basin and Range are forecast to experience a 22-percent decrease in average NCFI, largely due to declining receipts for sorghum and wheat, and reduced marketing income from cattle and dairy. For farm businesses in the Prairie Gateway, the expected increase in cattle farm NCFI partially offsets expected declines in wheat and cotton farm NCFI, resulting in an expected 25-percent decline in average net cash income.
- Expected NCFI declines for mixed grain, wheat, and corn businesses contribute to an expected 12-percent decrease in average NCFI for farm businesses in the Northern Great Plains.
- Forecast declines in average net cash income for cotton/rice, soybean, peanut, and mixed grain producers are contributing to an expected decline in average NCFI for farm businesses in the Mississippi Portal of about 12 percent.
- Expected NCFI declines for corn farm businesses contribute to the expected 21-percent decrease in average NCFI for Heartland farm businesses.
- Expected declines in poultry and hog receipts drive lower projected average NCFI in the Eastern Uplands (-5 percent). Increasing livestock costs and decreasing crop receipts drive the decline in the Southern Seaboard (-17 percent).
- The forecast drop in dairy NCFI contributes to an expected 34-percent decrease in average NCFI in the Northern Crescent. The forecast 27-percent decline in NCFI for the Fruitful Rim is driven by the expected drop in NCFI for specialty crop farms in 2015.
* Farm businesses are defined as operations with gross cash farm income of over $350,000 (labeled "commercial") or smaller operations where farming is reported as the operator's primary occupation (labeled "intermediate"). Approximately 11 percent of U.S. farms are commercial and 33 percent are intermediate. "Residence farms" comprise the remaining 55 percent of operations. These are small farms operated by those whose primary occupation is something other than farming.