Farm Income Will Decline This Year Over 1998

September 24, 1999

USDA predicts 1999 net farm income will total $43.5 billion, below the revised estimate for 1998 of $44.1 billion. Direct government payments should total $15.5 billion, second only to the $16.7 billion farmers received in 1987. Cash-flow problems for farm businesses this year will be pervasive in the heartland, Mississippi Portal and southern seaboard regions.

The estimates do not include the emergency assistance now pending in Congress. It is likely Congress will pass about $8 billion in new spending, the vast majority of which will be direct payments to farmers.

Income reductions this year will fall most heavily on farms specializing in soybeans, corn and hogs, USDA says. Net cash income should decline more than 20% from a year ago on soybean farms. Hog and corn farms are close behind with declines of 18% and 17% respectively.

With continued low prices for corn and soybeans, average net cash income in the heartland should be 13% less than 1998. Nearly 20% of the farm businesses in this region may not earn enough income to cover expenses. With a 13% decline in average net cash income between 1998 and 1999, 23% of farm businesses in the Mississippi Portal region are not expected to cover cash expenses. In the southern seaboard region, low prices for tobacco, cotton and soybeans should reduce average net cash income 7%.

Many farmers will use the additional government payments to reduce financial exposure by paying down debt, says USDA. Farm debt should stabilize this year at $172 billion after increasing 6% in 19997 and 4.5% in 1998.

"Despite the increase in debt in recent years," USDA says in the report, "farm business balance sheets have shown steady improvement throughout the 1990s, especially since 1992. Debt-to-asset ratios have improved as the 23% increase in farm business debt has been more than offset by the 29% rise in the value of farm business assets. Farm real estate, which represents the largest component of farm assets, is expected to increase in value in 1999."

The full report may be accessed on USDA's Economic Research Service web site at briefing/fbe/fore/fore.htm