February 2015
Ag Insight

Ag Insight

Net farm income in 2014 predicted down more than 21 percent

United States net farm income - a measure of the sector’s profitability - is forecast to be $96.9 billion in 2014, down over 21 percent from 2013’s estimate of $122.8 billion. Despite the decline, the 2014 figure would be the seventh highest value since 1970 after adjusting for inflation.

Higher production expenses are the main driver of the 2013-14 drop in net farm income as changes in crop and livestock receipts are offsetting. Crop receipts are expected to decrease 12.3 percent in 2014, led by declines in corn and soybean, while livestock returns are forecast to increase by 14 percent, largely due to anticipated record prices for beef cattle and milk.

Total production expenses are forecast to increase 5.7 percent in 2014, extending a 4-year upward trend in those costs.

Net cash income is forecast at $108.2 billion, down more than 19 percent from its 2013 estimate, and is projected to decline less than net farm income primarily because it includes the sale of carryover stocks from 2013.

Bulk commodity prices pull down U.S. ag exports value

Fiscal 2015 U.S. agricultural exports are forecast at $143.5 billion, $9 billion below fiscal 2014, primarily because of the outlook for lower bulk commodity prices.

Grain and feed sales are forecast down 18 percent from fiscal 2014 as lower prices, as well as reduced volume, lower the value of corn and wheat exports. Lower prices also are expected to trim the value of oilseed and product exports 15 percent despite the outlook for larger export volumes.

In contrast, horticultural product exports are forecast to grow 11 percent to $37 billion, making them the largest category of U.S. agricultural exports for the first time. Livestock products are also forecast to grow about 3 percent in fiscal 2015, primarily due to higher meat prices.

Lower prices are expected to reduce the value of exports to China, the largest U.S. agricultural market, by about 7 percent to $24.0 billion. Sales to Canada, the second largest U.S. market, are forecast to hold steady at about $21.8 billion, while sales to Mexico slip about 4 percent to $18.7 billion.

Insurance now available for specialty crops

Greater protection is now available from the Noninsured Crop Disaster Assistance Program for crops that traditionally have been ineligible for federal crop insurance.

The new options, created by the 2014 Farm Bill, provide greater coverage for losses when natural disasters affect specialty crops such as vegetables, fruits, mushrooms, floriculture, ornamental nursery, aquaculture, turf grass, ginseng, honey, syrup and energy crops.

According to USDA officials, ensuring growers of these crops can adequately protect themselves from factors beyond their control is also critical for consumers who enjoy these products and for communities whose economies depend on them.

Previously, the program offered coverage at 55 percent of the average market price for crop losses that exceed 50 percent of expected production. Producers can now choose higher levels of coverage, up to 65 percent of their expected production at 100 percent of the average market price.

Many rural counties continued to lose jobs in 2014

While the overall U.S. economy is in its sixth year of recovery from the 2007-09 recession, many rural areas have struggled to recover the jobs lost during the downturn.

Urban employment now exceeds pre-recession levels, but rural job numbers remain well below their 2007 peak and have continued to fall over the last year in many areas. Notable clusters of employment decline can be found in the Deep South, Appalachia, the Mountain West and the Pacific Northwest.

Employment in rural America as a whole is less than 2 percent above the employment trough reached during the recession and rose less than 1 percent between mid-2013 and mid-2014.

One example of employment growth, however, was seen in the Northern Plains where new jobs have been generated by rising energy extraction.

Rural counties adjacent to metro areas also have experienced faster-than-average job growth since 2009 after having suffered larger-than-average job losses during the 2007-09 recession.

 

Food from grocery stores, restaurants totals 12.9 percent of consumer expenditures

Despite higher food-price inflation in recent years, food’s share of U.S. consumer expenditures fell slightly (0.4 percent) over the decade as the budget shares for health care and housing rose.

With a 12.9 percent share, food ranked third behind housing (33.6 percent) and transportation (17.6 percent) in a typical American household’s 2013 expenditures.

Breaking down food spending further, 7.8 percent of expenditures were spent at the grocery store and 5.1 percent at restaurants.

Milk production continues shifting to larger operations

Although recent tallies show there were still nearly 50,000 U.S. dairy farms with fewer than 100 cows, that number represents a large decline from 20 years earlier when there were almost 135,000 small dairy farms.

Over the same period, the number of dairy farms with at least 1,000 cows more than tripled to 1,807 farms.

Movements in farm numbers were mirrored by movements in the share of cow inventories. Farms with fewer than 100 cows accounted for 49 percent of the country’s 9.7 million milk cows in 1992, but just 17 percent of the 9.2 million milk cows in the most recent count.

Meanwhile, farms with at least 1,000 cows now account for 49 percent of all cows, up from 10 percent in 1992.

The shift to larger dairy farms is driven largely by the economics of dairy farming. Average full costs of production (including the annualized cost of capital, imputed cost of unpaid family labor and cash operating expenses) are substantially lower on farms with larger herds.

USDA to release projections for next decade

The U.S. Department of Agriculture is scheduled to release its "Agricultural Projections to 2024" report on Feb. 11.

The report includes a full discussion of the commodity supply and use projections, as well as projections for global commodity trade, U.S. trade value and farm income.

The projections are based on specific assumptions about macroeconomic conditions, policy, weather and international developments, with no domestic or external shocks to global agricultural markets. The Agricultural Act of 2014 also is assumed to remain in effect through the projection period. Reflecting a composite of model results and judgment-based analyses and prepared during the last quarter of 2014, the projections use as a starting point the short-term projections from the November 2014 "World Agricultural Supply and Demand Estimates" report.