Net Farm Income to Decline Markedly in 2000

December 22, 1999

USDA forecasts net farm income will total $40.4 billion in calendar 2000, $7.6 billion less than the preliminary total of $48.1 billion for 1999. Plenty of supplies, low prices and government assistance in calendar 1999 make much of the difference. Net cash income is forecast to total $49.7 billion, $9.4 billion less than the comparable figure for 1999.

Taking a longer perspective, USDA says net farm income is expected to be 88% of the 1990-99 average with net cash income at 90% of the decade's average. The impact of low commodity prices is reflected in the $1.7 billion decline in total crop receipts from 1999 to $93.3 billion, the lowest since 1994. Year 2000 receipts should decline $2.1 billion for major field crops but increase $1.2 billion for fruit, vegetables and greenhouse-nursery products.

Livestock receipts should increase for the second consecutive year based on continued growth in the poultry sector and modest improvement in cattle and hogs. Dairy receipts should decline nearly $2 billion from 1999 to the lowest level since 1997.

The report also notes that for 2000, government payments should total $17.2 billion, about 7.8% of total cash income and $5.5 billion less than the expected record of $22.7 billion for 1999. Continued low prices for major crops generated a substantial increase in 1999 loan deficiency payments from 1998 and will continue to do the same in 2000 to the tune of $7.9 billion; in 1999, LDPs are expected to total $6.9 billion compared with just $1.8 billion in 1998.

A relatively large income decline from farming in 2000 will be offset partially by increased off-farm income. The average farm household income should be $59,350, less than the $61,363 estimated for 1999 but close to the 1998 average of $59,734.

Low commodity prices again will aggravate cash-flow problems for farmers in 2000 in several regions. The largest declines in average net cash income are expected in the Mississippi Portal, Eastern Uplands, Southern Seaboard and the Heartland.

Reduced income will require farmers to manage tighter cash flows, the report says. A higher proportion of debt service capability will be used, eliminating credit reserves and exposing a larger share of farms to potential debt repayment problems.

"Lower incomes rather than substantially rising debt levels or falling asset values will be the key factor that may contribute to rising debt service problems," says the report.

The summary of the agricultural income and finance report is on the Internet at http://usda.mannlib.cornell.edu/reports/erssor/economics/ais-bb/1999/ais73s.asc. The full report will be available in about a week.