Soybean, Corn, Hog Farmers Hit Most Hard by Income Declines

October 19

USDA says reductions in 1999 income will fall most heavily on farmers who specialize in soybeans, corn and hogs. Net cash income should decline more than 20% from a year earlier for soybean farms. Hog farm income should decline 18% and corn farm income 17%.

Farms specializing in beef cattle should realize on average income increases of 13%; poultry and dairy farms should have smaller increases.

Cash-flow problems for farm businesses this year should be the most pervasive in the heartland, Mississippi portal and southern seaboard regions. Given continued low prices for corn and soybeans, average net cash income in the heartland should be 11% less than in 1998, according to the USDA report.

The report does not include about $8.7 billion in emergency assistance that has been passed by Congress and is awaiting President Clinton's signature. With that assistance, farm incomes should be much closer to normal this year, at least on paper.

USDA says nearly 20% of the farm businesses in this region may not earn enough to cover expenses, compared with 14% in 1998. With an 11% decline in average net cash income between last year and this year, 23% of farm businesses in the Mississippi portal region are not expected to cover cash expenses. In the southern seaboard area, low prices for tobacco, cotton and soybeans should reduce average net cash income 12%.

Net farm income this year should total $43.5 billion, a bit below the $44.1 billion estimated for 1998. Direct government payments should total $15.5 billion, second only to 1987 when $16.7 billion was paid out to farmers. Loan deficiency payments are forecast to total $5.6 billion. Assuming the new emergency assistance is enacted, however, direct payments will easily set a record.

USDA expects many farmers will use additional government payments to reduce financial exposure by paying down debt. Farm debt is expected to stabilize this year at $172 billion after increasing 6% in 1997 and 4.5% last year.

"While the recent rise in debt may cause additional financial difficulty for some farms, it does not indicate widespread financial distress in the farm sector," says USDA. Still farmers are expected to use nearly 60% of the debt that can be supported by 1999 income, the highest level of use since 1986 but substantially below 1979-85 when farmers used more than 70% of their debt repayment capacity.

A summary of the report was released Sept. 23 and can be found on the Internet at http://www.econ.ag.gov/briefing/fbe/fore.htm

The entire report, Agricultural Income and Finance, Situation and Outlook Report, also will be available on the Economic Research Service web site http://www.econ.ag.gov.