While U.S. net farm income is expected to increase in 2019 year over year, it will still hover 11.4% below the 2014-2017 average.
Longer-term projections suggest little change in real farm income over the next decade, resulting in continued increases in the farm sector’s debt-to asset-ratio.
That’s according to new baseline projections by the Food and Agriculture Policy Research Institute (FAPRI) at the University of Missouri.
The projections show a slight increase in net farm income in 2019, but income levels are projected to stay down over the longer term, Scott Gerlt, University of Missouri program leader for U.S. crop market and policy analysis, said.
The projection is for tougher times ahead and a more depressed farm economy with debt rising relative to assets, he said.
The trade war with China is putting a lot of pressure on soybean prices, and carryover stocks are expected to push more soybean acres to corn. Pork is also being affected by the trade wars, he said.
The projection is for a slight recovery in the future for soybean and pork exports as trade adjusts but does not rebound. A trade resolution, however, could bring a very different scenario, he said.
At $68.6 billion, the analysts’ projected net farm income in 2019 is well below USDA’s projection of $77.6 billion released in March.
FAPRI’s projection of $442.0 billion in gross income in 2019 is higher than USDA’s forecast of $438.0 billion, but its projection of $373.5 billion in total expenses is also higher than USDA’s projection of $360.4 billion.
Soybean prices for the 2019 crop are expected to increase 36 cents per bushel year over year to $8.78 but fall short of the 2014-2017 average by 68 cents. In the long term, they are projected to average $9.06 a bushel from 2020 through 2028.
Corn prices are expected to increase 28 cents per bushel to $3.81, topping the 2014-2017 average by 30 cents a bushel but averaging $3.76 from 2020 through 2028.
Wheat prices are expected to increase 15 cents per bushel to $5.31, topping the 2014-2017 average by 44 cents. Further recovery in wheat prices, however, could be limited by continued large global supplies, and the long-term projection is for an average price of $5.18, according to the analysts.
In the livestock arena, increasing U.S. meat supplies continue to weigh on livestock and poultry markets, they said.
The price for fed steers for beef production is projected to decline about $3 per hundredweight to $114.17 in 2019, about $22 a hundredweight below the 2014-2017 average. The long-term projection calls for an average price of $122.40.
The prices on barrows and gilts for pork production is expected to decline more than $2 per hundredweight in 2019 to $43.69 per hundredweight, a decrease of about $12 per hundredweight from the 2014-2017 average. Those prices are, however, expected to recover to an average of $53.14 in the longer term.
The all-milk price is expected to increase about 80 cents per hundredweight in 2019 to $17.02 but remain nearly $2 a hundredweight below the 2014-2017 average. In the longer term, analysts are projecting an average price of $17.88.
FAPRI’s long-term projection for net farm income rises slowly to $85.3 billion in 2028, but the analysts point out that translates to $69.3 billion in 2019 dollars.
“The outlook is for continued stress on farm finances,” they said.
Although the debt-to-assets ratio on U.S. farms remains well below the levels of the 1980s — peaking at 22.2% in 1985 — it has increased from11.3% in 2012 to 13.5% in 2018. It is projected to average 14.8% over the next decade, climbing to 15.1% by 2028, according to the analysts.