May 2016
Ag Insight

Ag Insight

Farm income measures continue downward trend

After several years of high income, key measures of farm income have trended downward since 2013. The U.S. Department of Agriculture’s Economic Research Service forecasts that net cash farm and net farm incomes for 2016 will be $90.9 billion and $54.8 billion, respectively, or $81.1 billion and $48.9 billion, respectively, in inflation-adjusted dollars.

 

These amounts are below their respective 10-year average, in both nominal and inflation-adjusted terms.

Net cash farm income and net farm income are distinct measures of farm sector profitability. The first tracks cash receipts and cash expenses; the second also includes noncash transactions, including implicit rents, changes in inventories, capital replacement costs and others.

Before recent dips, the 10-year averages for both income measures have largely trended upward. Over the 2010 to 2013 period, surging crop and animal (including animal-product) cash receipts led net cash farm and net farm incomes higher. Prices are expected to have declined for a broad set of agricultural commodities in 2015, and fall further in 2016. Production expenses are forecast to contract in 2016, but not enough to offset the commodity price declines.

Commenting on the latest figures, Agriculture Secretary Tom Vilsack said, "Overall, net farm income for all producers is forecast down slightly, 3 percent, relative to 2015. This is an improvement from the double-digit declines seen in 2014 and 2015, and it reflects a more competitive trade environment, softening projection for global demand and a continuation of the dip in agricultural commodity prices.

"While agricultural exports climbed over 45 percent in value, totaling $911.4 billion over the past five years and besting all previous records in terms of value and volume and acting as an engine for America’s farm economy, (the recent) forecast shows how weaker foreign demand can weigh on farm income."

Agreement seeks to boost ag jobs for vets

The USDA has announced a joint agreement with the U.S. Chamber of Commerce Foundation to increase employment opportunities in the agricultural sector for military veterans and their spouses.

USDA Farm and Foreign Agricultural Services Deputy Under Secretary Lanon Baccam signed the agreement along with Eric Eversole, vice president at the U.S. Chamber of Commerce. Eversole, a commander in the Navy Reserve, also serves as president of the Hiring Our Heroes foundation. Baccam, a U.S. Army and Iowa National Guard veteran who served in Afghanistan, is USDA’s military veterans’ liaison.

The agreement opens the door for thousands of service members who participate in Hiring Our Heroes events around the world to benefit from USDA’s tools and resources, Baccam said. The new partnership also strengthens USDA’s ongoing efforts to help veterans pursue careers in the fast-growing agriculture and food sectors, he added.

The pact establishes a partnership between USDA and Hiring Our Heroes, a program helping military veterans, transitioning active duty personnel and their spouses and partners with training and opportunities to find meaningful employment when entering the civilian workforce.

Since 2009, USDA has provided $466.8 million in farm loans to help nearly 7,000 veterans purchase farmland, buy equipment, and make repairs and upgrades. Microloans, offering smaller amounts of support to meet the needs of small- or niche-type farm operations, have also grown in popularity among veterans.

Those wanting more information on how USDA can help military veterans transition into agriculture as a career should visit www.usda.gov/veterans.

U.S. corn use for ethanol expected to decline

 

After a decade of rapid growth, corn use for ethanol production in the United States is projected to fall over the next 10 years.

The downturn reflects declining overall gasoline consumption in the United States (mostly a 10 percent ethanol blend, E10), infrastructural and other constraints on growth for E15 (15 percent ethanol blend), and the small size of the market for E85 (85 percent ethanol blend) with less-than-offsetting increases in U.S. ethanol exports.

Even with the U.S. ethanol production decline, demand for corn to produce ethanol continues to be strong. While the share of U.S. corn expected to go to U.S. ethanol production falls, it accounts for over a third of total U.S. corn use throughout the projection period.

Rural areas targeted in efforts to stem drug abuse

Agriculture Secretary Tom Vilsack has announced a series of upcoming rural town hall meetings as well as funding for rural communities to use to conduct health and safety outreach around prescription painkiller and heroin abuse.

Opioids, including prescription painkillers and heroin, accounted for 28,648 deaths in 2014, and rural communities are affected at higher rates than urban communities. Health officials believe this is in part due to a lack of outreach and treatment resources available in rural communities, and this year USDA is expanding its Rural Health and Safety Education competitive grants program to give rural communities the opportunity to use funds for programs to address the opioid epidemic.

Earlier this year, President Obama tapped Vilsack to lead an interagency task force focused on this specific challenge. Recent efforts have helped identify effective tools to reduce drug use and overdose, including evidence-based prevention programs, prescription drug monitoring, medication-assisted treatment and the overdose-reversal drug naloxone.

"The opioid epidemic is a fast-growing problem all across America, and we know that rural communities are facing an even higher burden than those in urban areas," Vilsack said.

Japanese market for U.S. beef could grow

 

Japan is one of the largest beef-importing countries in the world and an important market for the United States. In 2014, it imported nearly $3.5 billion in beef and beef products, making it the third-largest beef importer in the world. The United States and Australia are the primary suppliers, and together represent roughly 90 percent of Japan’s 2014 beef imports.

From 2004 to 2006, Japan banned imports of U.S. beef due to the discovery of bovine spongiform encephalopathy, boosting imports from Australia and making it the top supplier of beef to Japan. The U.S. share of this market has since recovered, but imports remain below pre-ban totals.

The 2015 Japan-Australia Economic Partnership Agreement significantly reduces tariffs on Australian beef, potentially at the expense of U.S. beef. USDA is pushing for similar market access for this nation and believes it would mean a significant gain in Japanese imports of U.S. beef.

New standards affect chicken, turkey products

USDA’s Food Safety and Inspection Service has announced new federal standards to reduce salmonella and campylobacter in ground chicken and turkey products, as well as in raw chicken breasts, legs and wings.

Based on scientific risk assessments, FSIS estimates that implementing these standards will prevent an average of 50,000 illnesses annually.

As part of a move to make chicken and turkey items safer to eat, FSIS has also updated its microbial testing schedule at poultry facilities and will soon begin posting more information online about individual company’s food safety performance.

FSIS uses pathogen reduction performance standards to assess the food safety performance of establishments preparing meat and poultry products. By making the standards for ground poultry tougher to meet, ground poultry products nationwide will have less contamination and, therefore, result in fewer foodborne illnesses, the agency says.

FSIS implemented performance standards for whole chickens in 1996, but has since learned that salmonella levels increase as chicken is further processed into parts. Poultry parts like breasts, wings and others represent 80 percent of the chicken available for Americans to purchase. By creating a standard for chicken parts, and by performing regulatory testing at a point closer to the final product, FSIS believes it can greatly reduce consumer exposure to salmonella and campylobacter.

After these standards were proposed in early 2015, FSIS began to use routine sampling throughout the year rather than infrequent sampling on consecutive days to assess whether establishments’ processes are effectively addressing contamination problems. Once establishments have completed a full set of testing under the new standards, the agency will begin posting online which facilities pass, meet or fail the new standards.