Kevin PatrickFarm Economy Branch

Resource and Rural Economics Division

Outlook for the2014 U.S. Farm Economy

Overview

Net farm income in 2014 forecast: $95.8 billionDown more than 25% from 2013

Net cash income in 2014 forecast: $101.9 billionDown over 20% from 2013

Crop receipts are forecast down over 12 percent

Elimination of direct payments under the Agricultural Act of 2014

2014 Forecast

2014 farm income is forecast based off of the 2013 forecastIn the next forecast (August 2014), 2013 will become an estimate

The February 2014 forecast is based on the most recent forecasts of • Commodity demand• Crop and livestock inventories• Acres planted, yields, and production• Input use and costs

AND is different from the USDA long-term projections that we formulated in December 2013

Several factors that will influence 2014 outcomes

• Actual planting decisions• Weather (during planting, growing, and harvesting)

• Drought conditions in California• Outcomes of the Agricultural Act of 2014

$130.5

-$26.7

$1.2

-$5.1 -$1.6-$8.8

$2.3$3.9 $95.8

Crop receipt forecast driving major changes to net farm income from 2013F to 2014F

$ billion

Source: Economic Research Service, USDA. F= forecast.

-$34.7 billion2013F-2014F change

1970

1971

1972

1973

1974

1975

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1977

1978

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1981

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1983

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2007

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2009

2010

2011

2012

2013F

2014F

0

20

40

60

80

100

120

140$ billion

Income measures remain high despite declines

Inflation-adjusted net farm income and net cash income, 1970-2014F1/

1/ The GDP chain-type price index is used to convert the current-dollar statistics to real

(inflation adjusted) amounts (2009=100).

Net farm income

Net cash income

Source: Economic Research Service, USDA. F= forecast.

Net cash income $101.9Net farm income $95.82014

Source: USDA, ERSNote: 2013, 2014 forecasts

Corn Soybeans Fruits and tree nuts Vegetables and melons

Wheat Cotton0

10

20

30

40

50

60

70

80

Crop receipts are forecast to decline 12.4 percent in 2014Receipts for selected crops, 2010-2014F

$ billion

2010 2011 2012 2013F2014F

Source: USDA, ERSNote: 2013, 2014 forecasts

Cattle and calves Dairy Broilers Hogs0

10

20

30

40

50

60

70

80

Total livestock receipts are forecast up 1 percent in 2014Receipts for selected livestock products, 2010-2014F$ billion

2010 2011 2012 2013F2014F

1970

1971

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1973

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1986

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2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013F

2014F

0

50

100

150

200

250

300

Real cash expenses expected to decline for the first time since 2009

Inflation-adjusted1/ cash expenses, 1970-2014F$ billion(2009)

Cash expenses

Trend:2004-2013F

4.1% per yr.

Trend:1970-1979

5.1% per yr.

1/ The GDP chain-type price index is used to convert current-dollar amounts to real (inflation adjusted) amounts (2009= 100).

Source: USDA, ERSNote: 2013, 2014 forecasts

Note: Percent change from 2013 to 2014 is indicated at the top of each set of bars.

Source: USDA, ERSNote: 2013, 2014 forecasts

Feed

Labor

Ferti

lizer

Livesto

ck &

poultry

Seed

RepairsFu

elsRent

Interest

Pesticid

es0

10

20

30

40

50

60

Production expenses forecast down $4 billion led by lower feed expenses

Changes in expense items, 2013F - 2014F$ billion

-0.6%

7.8% -10.2%

-11.3%

6.5%1.5%1.1%

4.6%

1.0%

-12.0%

2013F

2014F

2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F0

5

10

15

20

25Government payments forecast down in 2014 to $6.1 billion

All other payments 1/

Conservation payments

Function of crop price payments 2/

Direct payments & CTP 3/

$ billion

1/All other payments include disaster relief payments, tobacco transition payments, and dairy program payments.

2/ Counter-cyclical payments, loan deficiency payments, marketing loan gains, certificate exchange gains, ACRE payments, ARC, and PLC program payments vary with crop prices.

3/ Direct payments and Cotton Transition payments (CTP) are fixed by legislation

Source: FSA, NRCS, and CCCNote: 2013, 2014 forecasts

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

20102012

2014F0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0$ trillion

Debt

EquityAssets

Debt

Inflation-adjusted asset values expected to set new record in 2014

1/ The GDP chain-type price index is used to convert current-dollar amounts to real (inflation adjusted) amounts (2009 = 100).

Source: USDA, ERSNote: 2013, 2014 forecasts

Inflation-adjusted farm sector assets, debt and equity, 1970-2014F

1970 1975 1980 1985 1990 1995 2000 2005 2010 2014F0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

Farm affordabilityFarm real estate values, 1970-2014F

$ trillions

Actual real estate value

Real estate value that current income and interest rates can support

Source: USDA, ERSNote: 2013, 2014 forecasts

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

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1993

1994

1995

1996

1997

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1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013F

2014F

0

5

10

15

20

25

30

10.5

11.8

Debt to asset and debt to equity ratios forecast to con-tinue downward trend in 2014Farm debt ratios, 1970 - 2014F

Percent

Debt to equity ratio

Debt to asset ratio

Farms Production Assets Debt0

10

20

30

40

50

60

70

80

90

100

1,206,000

956,000

Farm businesses represent over 950,000 farms and account for over 90 percent of production

Source: 2012 Agricultural Resource Management Survey (ARMS)

Gross cash farm income less than $350,000 and

operators report farming as their major occupation.

Gross cash farm income greater than $350,000 and

farms organized as nonfamily corporations or cooperatives.

operators report they are retired or have a major occupation other than

farming.

Farm Businesses

Residence Intermediate Commercial

Percent

Source: USDA, ARMSNote: 2013, 2014 forecasts

Cotton and rice

Specialty crops

Corn Mixed grain Soybeans and peanuts

Wheat Other field crops

0

50

100

150

200

250

300

Lower average net cash income is forecast for farm businesses that specialize in crop production in 2014Average net cash income for crop farm businesses1/

2010 2011 2012P 2013F 2014F

$ thousand

1/ The farm level forecasts are derived from partial budget modeling on the 2012Agricultural Resource Management Survey (ARMS) using parameters from the sector forecasts. The model is static and therefore does not account for changes in crop rotation, weather, and other local production impacts that occurred after the base year

Source: USDA, ERSNote: 2013, 2014 forecasts

Hogs Dairy Poultry Beef cattle0

100

200

300

400

500

600

2014 Forecasts up for dairy and poultry farm businessesAverage net cash income for livestock farm businesses

2010 2011 2012P 2013F 2014F

$ thousand

1/ The farm level forecasts are derived from partial budget modeling on the 2012 Agricultural Resource Management Survey (ARMS) using parameters from the sector forecasts. The model is static and therefore does not account for changes in crop rotation, weather, and other local production impacts that occurred after the base year

Average net cash incomes are forecast down for farm businesses in all regions in 2014 relative to 2013

Fruitful Rim-12.6%

Heartland-31.4%

Prairie Gateway-24.4%

Northern Great Plains

-31.3%

Basin and Range-21.7% Southern

Seaboard-16.8%

Eastern Uplands -10.1%

Mississippi Portal-30.5%Fruitful Rim

-12.6%

Northern Crescent-10.9%

Source: ERS partial model based using the 2012 Agricultural Resource Management Survey (ARMS) and parameters from the sector forecasts. The model is static

and therefore does not account for changes in crop rotation, weather, and other local production impacts that

occurred after the base year. 2012 ARMS data is preliminary.

Fruitful Rim-12.6%

Percent Change

-5 to -15

-15 to -25

-25 to -35

$130.5

-$26.7

$1.2

-$5.1 -$1.6-$8.8

$2.3$3.9 $95.8

Crop receipt forecast driving major changes to net farm income from 2013F to 2014F

$ billion

Source: Economic Research Service, USDA. F= forecast.

-$34.7 billion2013F-2014F change

Check out our website:http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances

Contact me:ktpatrick@ers.usda.gov

Questions?