Average Farm Business Net Cash Income Forecast To Decline in 2014
- Average net cash income for farm businesses is expected to decline 16.2 percent in 2014, but should remain above average income in 2010 and 2011.
- Farm businesses that specialize in livestock are forecast to experience significant increases in average net cash income in 2014. These increases are due to higher prices for most livestock products and decreasing feed costs.
- All farm businesses specializing in crops are forecast to experience declines in average net cash income, with the second consecutive year of expected declines for specialty crop and other field crop farms.
- Farm businesses continue to face higher costs for all major expense categories except for feed costs. Cash expenses are expected to increase about 5 percent on average in 2014.
Average net cash farm income (NCFI) is forecast at $94,566 for all farm businesses* in 2014, a decline of 16.2 percent from 2013, after several years of increasing income (see table). This decline is in line with the sectorwide forecast 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.
Many program crops are forecast to achieve record production accompanied by dramatically 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 2014. Crop receipts are forecast to decline 38 to 44 percent, on average, in 2014 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 36 percent in 2014, following a 20-percent drop in 2013. Specialty crop receipts are expected to decrease by about 7 percent in 2014, largely due to fruit and vegetable prices declining after increases in 2011-13. Labor expenses, which make up 39 percent of all cash expenses for specialty crop farms, are forecast to increase 8 percent due to both higher wages and increasing output. Total cash expenses are forecast to increase by about 6 percent for specialty crop farm businesses.
In contrast to crop farm business trends, average NCFI forecasts for farm businesses specializing in livestock production are significantly higher than in 2013. After several years of increasing expenses, livestock farm businesses across all specializations are expected to benefit from a decline in feed costs of 4.7 percent. Feed expenses make up 47 percent of cash expenses for dairy, 32 percent for hog, 28 percent for poultry, and 18 percent for beef cattle farm businesses, on average.
Dairy farm businesses are forecast to experience a 77-percent increase in average NCFI in 2014, with higher milk prices and lower feed expenses expected in 2014. Despite lower output from beef cattle farm businesses due to reduced herd size, higher prices for cattle and calves are expected to result in 18 percent higher beef cattle receipts. This gain more than compensates for higher production costs driven by increased livestock purchases, leading to an expected 33-percent increase in the average NCFI for beef cattle farm businesses in 2014. With hog prices projected to increase, average NCFI for hog farm businesses is forecast to increase 5 percent in 2014. Driven by increased receipts, average NCFI for poultry and egg farm businesses is forecast up over 19 percent from 2013.
Average NCFI is forecast to decline in 2014 for all crop specializations and increase for livestock specializations except for other livestock; 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 1-percent increase in average NCFI, largely due to the performance of cattle businesses. For farm businesses in the Prairie Gateway, the expected increase in cattle farm NCFI partially offsets expected declines in crop farm NCFI, resulting in an expected 11-percent decline in average net cash income.
- Expected NCFI declines for mixed grain, wheat, and corn businesses contribute to an expected 22-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 40 percent.
- Expected NCFI declines for corn farm businesses contribute to the expected 25-percent decrease in average NCFI for Heartland farm businesses.
- Expected gains in poultry and hog receipts drive higher projected average NCFI in the Eastern Uplands (3 percent). Increasing livestock costs and decreasing crop receipts drive the decline in the Southern Seaboard (-9 percent).
- The forecast increase in dairy NCFI contributes to an expected 6-percent increase in average NCFI in the Northern Crescent. A decrease is forecast for the Fruitful Rim (-14 percent), which is affected by the expected drop in NCFI for specialty crop farms in 2014.
* 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 9 percent of U.S. farms are commercial and 34 percent are intermediate. "Residence farms" comprise the remaining 57 percent of operations. These are small farms operated by those whose primary occupation is something other than farming.