USDA’s Updated Net Farm Income Projection Could Look Like the 1980s

Farm Income - 8-30-18
Does the farm income picture look like the 1980s? ( MGN Image )

As financial pain ripples across agriculture today, it’s a grim reality for some farmers. The U.S. Department of Agriculture’s (USDA) most recent net farm income projection from February pegs income to fall to a 12-year low at $59.5 billion. Last year provided a slight rebound in net farm income, but as trade issues pressure commodity prices, it’s adding to the bleak outlook in 2018.

“It starts to add uncertainty and uncertainty in the commodity markets is translating into lower grain prices, which is lower net farm income,” said David Widmar, co-founder of Ag Economic Insights. “Lower cash receipts and the weight of it are starting to show up.”

USDA is scheduled to give an updated look at net farm income projections on Thursday; the net farm income projections will be released days after the agency revealed how much the tariff relief aid package will pay out to farmers.

The trade aid will help offset some of this [lower net farm income], but the USDA already said export losses are an $11 billion hit to the farm economy,” said Widmar. “We're already in a difficult situation.  $11 billion dollars off the top could put us closer to crisis levels that we last saw in the 1980s.”

Widmar said the question is if USDA will include the tariff aid in its updated outlook, and how much the additional money will help offset lower income projections.

“Historically speaking, we're at a low spot,” said Widmar. “If we just took $11 billion right off the top, we'd be back at those 1980 levels. We had that trade aid to offset it. But again, the ag economy had a lot of development, so we'll see what the USDA says here at the end of the month and they'll give us an update.”

David Kohl is professor emeritus of agricultural and applied economics at Virginia Tech. He said today’s situation already revealed similarities to the 1980s. However, economic hardships are happening more slowly today than what agriculture experienced 30 years ago.

“We've been in a six-year agriculture economic reset,” said Kohl. “In the 1980s it was like a curveball and  dropped off the table and slowly came back after four years. This one I call ‘the grinder.’ It's having a real impact not only on the financial piece, but also the emotions of agriculture producers out there.”

He said it seems like there’s a surprise around every corner when it comes to the ag economic outlook today. For farmers, the surprises have provided more commodity pressure lately, which is pushing profits lower on the farm.