USDA reports 2016 farm profits

Net farm incomes projected to decline for the third year.

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Net farm income, a measurement of profitability, is forecasted for 2016 at $90.1 billion nationally, down 14.6 percent from 2015. The national net farm income is on target to be the lowest since 2009. (Farm and Dairy file photo)

SALEM, Ohio — The USDA Economic Research Service released reports Nov. 30 forecasting what most farmers already know — the U.S. 2016 net farm income will decrease for the third straight year.

Net farm income, a measurement of profitability, is forecasted at $90.1 billion nationally, down 14.6 percent from 2015.

If these projected numbers are realized, 2016 net farm income would be the lowest since 2009 in both real and nominal terms.

Overall, national cash receipts are forecast to fall to $23.4 billion, down 6.2 percent in 2016, and a 12.3 percent drop in animal/animal product receipts. Crop receipts are essentially unchanged from 2015.

Nearly all major animal specialties — including dairy, meat animals, and poultry/eggs — are forecast to have lower receipts nationally.

Strong dollar

“It is tough times in this part of the country,” said Jayson Harper, professor of agricultural economics at Pennsylvania State University. “Because of our strong dollar, international trade for animal producers has gone down. Dairy has especially seen the hit. For the crop producers, it has been a little better story.”

The strong dollar affects anything we are exporting — if countries can get it somewhere else for cheaper, they will, said Harper.

Net cash farm income is forecast up for farm businesses specializing in mixed grains, up 10.4 percent; corn, up 15.1 percent; and soybeans, up 11.8 percent.

Direct government farm program payments are projected to rise by $2.1 billion, a 19.1 percent increase to $12.9 billion in 2016.

After sharp declines in 2015, average net cash farm income for most farm businesses specializing in crop production is expected to improve, based on USDA reports.

For the second year in a row, production expenses are down. Total production expenses are forecast down $9.2 billion, or 2.6 percent, compared to 2015, led by declines in farm-origin inputs such as seed, livestock/poultry, and seed, as well as fuel and oils.

A decline in spending on fuels and oils is expected for the second consecutive year, with the U.S. Energy Information Agency expecting diesel and gasoline prices down over 15 percent in 2016.

“Low prices of energy is assisting in lowering inputs, but it is a domino effect. If we tracked costs one-to-one versus profits, we will see costs have gone down, but commodity prices have cratered,” Harper said.

Farm debt

Farm asset values are forecast to decline by 2.1 percent in 2016, and farm debt is forecast to increase by 5.2 percent.

Pennsylvania products and the percentage of the 2016 cash receipts

1. Dairy products, 26.7 percent

2. Chicken eggs, 13.5 percent

3. Cattle and calves, 10 percent

4. Mushrooms, 7.9 percent

5. Broilers, 7.7 percent

Labor costs are forecast to increase in 2016 by 5.4 percent, still slightly below 2014 highs, after dipping in 2015. Wage rate increases are putting pressure on hired labor costs.

“Farmers tend to see where they can make cuts and make do. Many have a big asset base in land and machinery to help weather the storm.”

A decrease in herd sizes — dairy, beef and hogs — will eventually cause the prices to rebound, said Harper.

Local impact

Ohio net farm income is expected to dip by nearly half a million from less than $1.2 billion from $1.7 billion.

Pennsylvania’s fall is even steeper, from $2.65 billion to $1.9 billion in 2016.

Kentucky net farm income is expected to dip to less than $1.5 billion in 2016, down from $1.7 billion in 2015 and potentially its lowest level since 2010.

Indiana in 2014 had a net farm income of $5.5 billion, $2.8 billion in 2015 and the report is now projecting $1.3 billion in 2016, making a large impact on the economy, the lowest since 2002. The trend continues in New York with a drop from $1.7 billion to $1 billion in 2016.

“Any time the dollar is strong, it is going to be bad for agriculture, because of the world market,” Harper said. “The strength of the dollar isn’t going anywhere and therefore the farm stress will continue in 2017.”

Poultry

Poultry receipts are likely to be back on track in 2016 after rebounding from the effects of avian influenza in 2015, with growth continuing in 2017. Poultry and egg receipts are up in Pennsylvania, Indiana, Ohio, West Virginia and New York.

Dairy

In Pennsylvania, dairy profits have fallen by nearly a billion from a year ago to $1.9 billion in net profits from $2.7 billion in 2015

Ohio dairy numbers are reflecting a similar tune, at just over $1.3 billion in 2015 and declining to $9.8 million in 2016.

Dianne Shoemaker, field specialist in dairy production economics for Ohio State University Extension, keeps detailed records of Ohio milk prices.

“In 2015, the average national milk price was $15.80 per hundredweight. So far this year we are averaging around $14.82,” Shoemaker said.

Energy costs have remained low and feed prices have moderated, she said, “but most dairy farms are losing money.”

Shoemaker organizes a report for the Ohio Farm Business Summary each year, surveying 40 dairy enterprises in northeast Ohio with a wide range of herd sizes.

Ohio products and the percentage of the 2016 cash receipts

1. Soybeans, 23 percent

2. Corn, 22.1 percent

3. Chicken eggs, 13.1 percent

4. Dairy products, 10.6 percent

5. Cattle and calves, 8 percent

“In 2014, the survey told us the net return per cow was $1,266, which was more than the last three years combined,” Shoemaker said. “The 2015 survey reported the net return for 2015 to be less than $40 per cow. I fully expect the 2016 results to report a negative number.”

Ohio’s animals and products cash receipts nearly break even around $4.1 billion, thanks to the egg industry increase, as the dairy cash receipts are down to just under $1 billion from $1.3 billion.

Other states

New York’s dairy products cash receipts, contributed to their overall animal and products cash receipts decline of nearly $1 billion. In dairy alone, they fell from $3.5 billion to $2.56 billion in 2016. Lucky for them, the other commodities nearly broke even.

New York’s stats also model the trend, with the value of agricultural production down to $6 billion from more than $7 billion in 2015

Kentucky’s total agricultural cash receipts in 2016 are projected to fall to $5.4 billion, off 7 percent from $5.8 billion in 2015 and off 17 percent from the record high of $6.5 billion in 2014.

Future

“We are subject to influences beyond our borders. With the strong dollar, it is harder for us to export more product,” Shoemaker said.

Experts don’t see much change in net profits for 2017.

“This isn’t the first time we have dealt with these issues. They will certainly turn around,” Harper said.. There will have to be policy put in place to help cope; and there are safety nets in place for some of the shortfalls.”

Find the complete reports at https://data.ers.usda.gov.

2016 net farm income

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Katy Mumaw is a graduate of Ohio State University where she studied agricultural communications and Oklahoma State University earning her master's in agricultural leadership. The former Farm and Dairy reporter enjoys family time and sharing the stories of agriculture.

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