The USDA Economic Research Service on Friday updated their net farm income forecast for 2019. The agency expects net farm income to increase $4.0 billion or 4.8% from 2018 to $88 billion in 2019. If realized, inflation-adjusted net farm income would remain slightly below its historical average of $90.1 billion. USDA data notes the increase in government payments and flat expenses are the driving forces behind the income increase.
Overall, USDA expects farm cash receipts to decrease $2.4 billion to $371.1 billion in 2019. An increase of total animal/animal product receipts of $0.9 billion is offset by a $3.3 billion decrease in total crop receipts compared to 2018. Income from milk and hogs are forecast to increase largely due to expected higher prices while receipts for soybeans are forecast to decline because of expected lower prices and lower quantities sold, USDA says.
Direct government farm payments of $19.5 billion are pushing the total income level higher for 2019. Those payments include Federal farm program payments paid directly to farmers and ranchers but exclude USDA loans and insurance indemnity payments made by the Federal Crop Insurance Corporation (FCIC). Market Facilitation Program (MFP) payments make up a large portion of this category. The 2019 forecast includes payments from the program first implemented in 2018 but received by producers in calendar year 2019, plus the expected payments from the first tranche of the program announced in 2019. USDA assumes producers will receive 50% of the announced total of $14.5 billion in the first tranche.
USDA expects profitability to be driven by relatively flat expenses compared to 2018. Total production expenses, including expenses associated with operator dwellings, are forecast to increase 0.4% in 2019 to $346.1 billion. While feed and labor expenses are forecast to increase 4.4% and 6.2% respectively, USDA expects input costs such as seed, pesticides, fuels/oils, and interest to decline. After adjusting for inflation, the agency says total production expenses will decrease $4.6 billion or 1.3%.
Meanwhile the agency economists expect equity and assets to increase 1.8% and 2% respectively. Farm sector assets are forecast to increase in 2019 to $3.1 trillion as farm real estate assets are forecast to increase 1.9%.
The latest economic update from USDA-ERS was not all rosy. The agency says liquidity measures are expected to weaken, with working capital levels forecast down 18% and farm debt to rise 3.4%. Debt-to-asset levels for the sector are forecast to rise again in 2019, continuing an upward trend since 2012.