U.S. Raises Farm-Income Forecast After Crop Sales Increase
Washington — The U.S. Department of Agriculture raised its forecast for U.S. farmers’ profits this year, with crop sales rising above an earlier estimate and help coming from other sources of income such machine rentals.
Income will be $100.3 billion, the USDA said last week in a report, down 21 percent from 2014 and a second straight annual decline. Still, that’s 12 percent more than forecast in February. Crop receipts are increasing as farmers sell off inventories and revenues are also getting a boost from tourism and other less-traditional sources.
U.S. farmers are seeking additional income streams as low crop prices and rising costs erode incomes that peaked earlier this decade. That’s pinching sales for companies such as Deere & Co., the largest tractor maker, and eroding the value of farmland.
“Farmers are recognizing that the prices they saw aren’t coming back,” Jeff Swanhorst, chief credit officer for Agribank, a farm lender based in St. Paul, Minn., said before the report was released. “You’re seeing them cut back on machinery purchases, and farmers who rent land are renegotiating with their landlords.”
So-called farm profits — a measure including the value of inventories and adjusting for capital depreciation — will be $58.3 billion in 2015, the USDA also said. That’s down 36 percent from last year and the lowest since 2006. The USDA cited a “modest decline” in farmland values, along with higher debt loads, declining inventory values and depreciating assets that aren’t being replaced.
Iowa, the biggest U.S. grower of corn and soybeans, is seeing its biggest drop in farmland values since 1987, the USDA said in a separate study earlier this month.
Farmers are “trying to conserve whatever cash they can,” reducing purchases to essentials, said Brent Gloy, an agricultural economist at Purdue University in West Lafayette, Ind., in an interview. While farm balance sheets remain in good shape by historical standards, some individual producers will be feeling financial pressure, he said.
“Farmers for a long time have been riding land values to access credit,” he said. “As that dries up, you won’t see people getting all the seed treatments, all the machinery they’d dreamed of having.”
The USDA in February predicted net-cash income of $89.4 billion. The next forecast will be in November, after this year’s harvest.