meta US Net Farm Income Forecast at $113.2B, Down 13.8% from 2013 :: The Bullvine - The Dairy Information You Want To Know When You Need It

US Net Farm Income Forecast at $113.2B, Down 13.8% from 2013


Yesterday, USDA’s Economic Research Service (ERS) updated its 2014 Farm Sector Income Forecast, which stated that, “Net farm income is forecast to be $113.2 billion in 2014, down 13.8 percent from 2013′s forecast of $131.3 billion. If realized, the 2014 forecast would be the lowest since 2010, but would still remain more than $25 billion above the previous 10-year annual average. After adjusting for inflation, 2013′s net farm income is expected to be the highest since 1973; the 2014 net farm income forecast would be the fifth highest.

ERS noted that, “The annual value of U.S. crop production is expected to decline 10.6 percent in 2014 from 2013′s predicted all-time high. Expected declines in cash receipts are especially large for feed crops such as corn. Corn receipts are expected to experience the largest dollar decline in 2014 receipts among farm commodity categories… . Declines in soybean receipts are anticipated as higher production and quantities sold are more than offset by large price declines (11.3 percent).”

With respect to livestock, ERS pointed out that, “Record-high annual prices are expected for livestock, dairy, and poultry products. Large gains are expected in receipts from sales of cattle and calves, hogs, milk, broilers, and eggs. While beef production is expected to decline in 2014, the annual cattle price is expected to increase dramatically (20.4 percent), to its highest level on record.”

Production expenses are also expected to climb. ERS stated that, “The projected $14.2-billion increase in 2014 production expenses extends a 5-year upward trend. Forecast production expenses in 2014 would be the highest on record both nominally and in inflation-adjusted dollars.”

On the issue of government payments, ERS indicated that, “Government program payments going directly to producers are expected to total over $9 billion in 2014, representing a 15-percent decrease from 2013 (see table on government payments). The 2014 forecast includes payments made by the U.S. Government in 2014 for losses incurred in earlier years.  Market prices are still high enough for most crops that 2014 payments from price-dependent programs (such as countercyclical payments, marketing loan gains, loan deficiency payments, and milk income loss payments) are anticipated to be zero for all but a few commodities (peanuts, upland cotton). Farmers are currently expected to receive Average Crop Revenue Election (ACRE) payments in 2014 from their 2013 crop-year revenue losses, mostly from corn.”

With respect to farmland values, ERS explained yesterday that, “Historically, farmland values have driven changes in the total value of farm sector assets, due to the large proportion of the sector’s assets held in real estate. Accordingly, the projected rise in farm sector assets in 2014 primarily represents an expected 2.9-percent increase in the value of farm real estate. Growth in farmland values is forecast to slow in 2014 relative to recent years due to reduced farm income expectations, lower crop prices, and higher interest rates.”

Yesterday’s update added that, “Cash rent is forecast to increase 4.2 percent, based on a relatively small increase in total real estate values and higher planted acreage.”

ERS also noted yesterday that, “Median total farm household income is forecast to decrease slightly in 2014, to $70,992, down from $71,504 forecast for 2013. Given the broad USDA definition of a farm, many farms are not profitable even in the best farm income years. Median farm household income continues to be negative when calculated for all farm households in the 2014 forecast. The median farm income of -$1,626 is down slightly from the 2013 forecast of -$1,140. Most farm households earn all of their income from off-farm sources–median off-farm income is projected to increase by 6.4 percent in 2013 to $62,500 and 3.7 percent in 2014 to $64,840.”

Gregory Meyer and Luc Cohen reported yesterday at The Financial Times Online that, “Rising production costs and smaller government subsidies in the wake of recently passed farm legislation will also cut profits, the department said.

“The retreat is already starting to bite, with soaring land values levelling off in some areas and equipment sales softening.”

The FT article noted that, “‘A lot of rural areas will very much feel this,’ said Matthew Roberts, an agricultural economist at Ohio State University. ‘It is less profit turned around and spent in these communities, whether on farm machinery or cars or clothes.’”

Jesse Newman reported on today’s Wall Street Journal that, “The latest projected decline is narrower than the 27% drop in 2014 net farm income that the USDA forecast in February. The change is due largely to an improved outlook for livestock farmers, who are benefiting from record prices for beef and pork as well as low prices for corn and other grains used in animal feed. The USDA said on Tuesday that it expects livestock farmers’ receipts to rise 15% this year, compared with a February projection of a 0.7% rise.”

And Bloomberg writers Alan Bjerga and Megan Durisin reported yesterday that, “Gains in farmland values that climbed 8.1 percent this year are slowing. While rising hog and cattle prices have aided livestock producers, record grain and oilseed harvests are dragging profits, said University of Missouri at Columbia agriculture economist Pat Westhoff.

“‘It’s a reversal of fortunes,’ Westhoff said. ‘We had several years of incredible crop-sector income, but now it’s livestock,’ he said. ‘You’re starting to see some softness some places, and in some cases farmers are going to have trouble covering their expenses.’”

More broadly, Isabella Steger reported in today’s Wall Street Journal that, “China’s grain cupboard is overflowing.

“As the harvest looms next month, the country is on track for an 11th year of bumper grain crops. But production is too much, even for the world’s most populous nation, with warehouses bursting at the seams and posing a dilemma for policy makers.

“Estimates from state media say the government will be sitting on 150 million tons of grains that include three of the most important crops for China: rice, wheat and corn. That is double the 75 million tons last year and adds to an oversupply of these agricultural commodities that is pressuring prices lower.”

Ms. Steger added that, “China’s surplus couldn’t have come at a worse time for U.S. farmers, who are expected by the USDA to harvest a record 14 billion bushels. Corn futures have dropped 15% this year after falling 40% last year, and China’s unwillingness to buy U.S. corn will further pressure prices, said Jason Britt, president of brokerage Central States Commodities Inc. in Kansas City, Mo.”

And Tony C. Dreibus reported yesterday at The Wall Street Journal Online that, “Soybeans fell to their lowest intraday price for a front-month contract in almost four years, as September futures near expiration, spurring investors to close out their positions… . Soybean futures prices for September delivery plunged on Tuesday by 30 1/4 cents, or 2.7%, to $10.82 a bushel, the lowest intraday price for a front-month contract since Oct. 7, 2010.”

Mr. Dreibus also noted that, “Meanwhile, corn prices fell to their lowest in two weeks, also as investors have been selling September contracts and as continued rain falls in parts of the Midwest.

“Corn futures prices for September delivery dropped 6 cents, or 1.7%, to $3.54 a bushel, and earlier reached the lowest price for a front-month contract since Aug. 21, while December futures declined 5 1/2 cents, or 1.5%, to $3.62 a bushel.”

University of Illinois agricultural economist Gary Schnitkey indicated yesterday at the farmdocDaily blog (“Will High Yields Rescue 2014 Crop Returns?“) that, “Expected corn yields are high for many areas of the corn-belt. In central Illinois, for example, corn yields may average 220 bushels per acre on many farms. However, a 220 bushel yield will not result in positive returns for corn, given current expected 2014 crop prices and given that farmland is rented near the average cash rent. To have positive returns, yields must be exceptionally high. In this year, those farmers forward contracting a substantial portion of 2014 production likely will have higher returns than farmers who did not contract. Due to difference in yields and marketing decisions, there will be a wide range in revenues across farms.”

Also yesterday Elizabeth Williams reported at DTN (link requires subscription) that, “Agricultural economists from around the world met in Des Moines last week to assess global competitiveness of the world’s key corn and soybean producers. Using 2011 data, Brazilian soybean farmers and Ukrainian corn farmers scored highest profit margin, with a typical U.S. farm in Iowa coming in second ahead of Argentina for both corn and soybeans and ahead of Brazilian corn producers.

“Why wasn’t the U.S. first? ‘In the U.S., as profits increase, so do land costs for American farmers,’ explained Yelto Zimmer, a senior crop economist at the Thuenen Institute of Farm Economics in Germany.”

The DTN update added that, “High land rents account for about half of U.S. soybean costs, almost equal to direct, operating and other costs combined. For corn, land was more than a third of the total cost of production in the U.S, according to the data presented by Kelvin Leibold, a farm management specialist with Iowa State University Extension and Outreach.”

In transportation news, Bloomberg writer Alan Bjerga reported yesterday that, “The Missouri River might help alleviate grain backups caused by railroads hauling more crude oil in the northern U.S., though federal spending on infrastructure and changes in water allocations may be needed, said Michael Toohey, head of Waterways Council Inc.”

And in trade developments, Reuters writers Adriana Barrera and Krista Hughes reported yesterday that, “The United States is set to slap import duties as high as 17 percent on Mexican sugar in a victory for the powerful U.S. sugar industry but a blow to U.S. candy and soft drink makers who face paying more for the sweetener.

“Mexican producers urged a deal to end the spat while the government hinted at retaliation, highlighting the potential for Tuesday’s Department of Commerce ruling to increase tensions in a months-long trade dispute over claims cheap subsidized sugar is flooding the heavily protected U.S. market.”

The article added that, “U.S. Agriculture Secretary Thomas Vilsack has said he would encourage a settlement, but U.S. lawmakers, food manufacturers and commercial users of sugar have warned a deal would inflate food prices and threaten U.S. food manufacturers.”

Leslie Josephs and Amy Guthrie reported yesterday at The Wall Street Journal Online that, “The tariff, which could take effect as early as next week, would attach fees as high as 17.01% on Mexican sugar. However, the duties won’t become final until January, after the Commerce Department looks into the claims. U.S. and Mexican authorities are in talks to reach a compromise. On Tuesday, the Mexican Sugar Chamber, an industry group, said it would accept an export cap instead of a tariff.”

Meanwhile, Bloomberg writer Yoga Rusmana reported today that, “Global sugar consumption needs to outstrip supply by at least 3 million metric tons to 4 million tons before prices recover significantly, according to the International Sugar Organization.”

Farm Bill

A news release yesterday from USDA’s Risk Management Agency stated that, “The [USDA] today released additional information on the Supplemental Coverage Option (SCO) availability for Spring 2015 crops. A provision of the 2014 Farm Bill, SCO is a county-level policy endorsement that covers a portion of the deductible of the underlying crop insurance policy.”

The release added that, “To help producers better understand the SCO and Stacked Income Protection Plan for producers of upland cotton (STAX) programs, RMA is also announcing an online Crop Insurance Decision Tool. This tool, located athttp://prodwebnlb.rma.usda.gov/apps/CIDT/ on RMA’s website, demonstrates how SCO and STAX plans work – how coverage is determined, when it pays, the approximate premium cost, and how it interacts with an underlying crop insurance policy. This user-friendly resource can help producers quickly explore and understand the variety of coverage options that these new products offer. Users will get estimates to help them make purchasing decisions. Producers should consult their crop insurance agent for detailed information and a premium quote specific to their operation.”

Political Notes- Farm Bill

Kristina Peterson reported in today’s Wall Street Journal that, “On the road to winning Iowa’s Republican Senate primary, state senator Joni Ernst opposed the five-year farm bill passed by Congress. Now, her stance on the legislation has become the focus of attacks from her Democratic opponent in the general election, Rep. Bruce Braley.

“One of the few bipartisan measures passed by Congress this year, the farm bill recently has cropped up on the campaign trail as a partisan flash point.

“Democrats in at least five other battleground states in this year’s tight contest to determine control of the Senate are highlighting their support for the bill while many GOP candidates are saying Congress missed an opportunity to overhaul costly food-stamp and farm programs.”

Ms. Peterson explained that, “The farm measure has long held special resonance among voters in states where agriculture remains an important part of the local economy and identity. But the struggle to pass the $956 billion bill, which ended a system of direct payments to farmers, beefed up the crop-insurance program and scaled back nutrition funding, has made it a potent political issue.

“Because it was a compromise, the measure remains a target for critics, including conservatives who contend it is too expensive and liberals who say it curbs food-stamp funding too much. Incumbents who voted for it point to it as a major legislative achievement at a time when Congress is criticized for partisan gridlock.

“Many Democrats are touting the law, seizing the chance to pummel conservatives who oppose it–positions many took during their primary campaigns.”

Alexandra Jaffe reported yesterday at The Hill Online that, “Democratic Rep. Bruce Braley is essentially tied with Republican Joni Ernst in a new poll of the Iowa Senate race, the latest indication the race is more of a challenge Democrats had expected.”

Climate

Justin Gillis reported yesterday at The New York Times Online that, “Runaway growth in the emission of greenhouse gases is swamping all political efforts to deal with the problem, raising the risk of ‘severe, pervasive and irreversible impacts’ over the coming decades, according to a draft of a major new United Nations report.

“Global warming is already cutting grain production by several percentage points, the report found, and that could grow much worse if emissions continue unchecked. Higher seas, devastating heat waves, torrential rain and other climate extremes are also being felt around the world as a result of human-produced emissions, the draft report said, and those problems are likely to intensify unless the gases are brought under control.”

The Times article pointed out that, “The report was drafted by the Intergovernmental Panel on Climate Change, a body of scientists and other experts appointed by the United Nations that periodically reviews and summarizes climate research. It is not final and could change substantially before release.

“The report, intended to summarize and restate a string of earlier reports about climate change released over the past year, is to be unveiled in early November, after an intensive editing session in Copenhagen. A late draft was sent to the world’s governments for review this week, and a copy of that version was obtained by The New York Times.”

And Coral Davenport reported on the front page of today’s New York Times that, “The Obama administration is working to forge a sweeping international climate change agreement to compel nations to cut their planet-warming fossil fuel emissions, but without ratification from Congress.

“In preparation for this agreement, to be signed at a United Nations summit meeting in 2015 in Paris, the negotiators are meeting with diplomats from other countries to broker a deal to commit some of the world’s largest economies to enact laws to reduce their carbon pollution. But under the Constitution, a president may enter into a legally binding treaty only if it is approved by a two-thirds majority of the Senate.

“To sidestep that requirement, President Obama’s climate negotiators are devising what they call a ‘politically binding’ deal that would ‘name and shame’ countries into cutting their emissions. The deal is likely to face strong objections from Republicans on Capitol Hill and from poor countries around the world, but negotiators say it may be the only realistic path.”

Regulations- CFTC

A news release yesterday from the Commodity Futures Trading Commission (CFTC) stated that, “The [CFTC] today issued an Order filing and simultaneously settling charges against Merrill Lynch, Pierce, Fenner &Smith Incorporated (Merrill Lynch) for failing to diligently supervise its officers’, employees’, and agents’ processing of futures exchange and clearing fees charged to its customers from at least January 1, 2010 through April 2013. Merrill Lynch is a CFTC-registered Futures Commission Merchant and approved swap firm located in New York, New York.”

“The CFTC Order requires Merrill Lynch to pay a $1.2 million civil monetary penalty and cease and desist from violating CFTC Regulation 166.3 governing diligent supervision. The Order also requires Merrill Lynch to comply with undertakings that include, hiring an outside consulting firm to assist in training staff and reviewing and updating its current procedures regarding exchange and clearing fee reconciliations,” the release said.

Source: Farmpolicy.com


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