The USDA is predicting that net farm income will be down 38% from last year while American Farm Bureau economist Bob Young says net farm income is down 53% compared to the recent near record in 2013 of $123.75 billion. “That’s a pretty substantial decline over the course of a couple of years or so, he stated. “This is kind-of the first time in a long time that real estate values also came down. Asset values have also come down in 2015 relative to 2014; it’s been a long time since we’ve had that happen.”
As Indiana farmers know all too well, drops in commodity prices are the main reason. However, according to Young, there are additional factors, “We’re also seeing, though, at the same time, some noticeable declines in milk prices as well, so the livestock sector that before had pulled the overall numbers up is just not there either this year. We’ve also seen cash expenses haven’t moved much at all, just contributing to dragging this overall number down.” The USDA has forecast a more than 9% decrease in livestock receipts, thanks largely to a decline in dairy and hog revenues amid increasing production of both milk and pork as well as lower prices. Revenue from broiler chickens is also expected to decline as export bans linked to a highly contagious strain of bird flu increase U.S. inventories and push prices lower, the government said. Government forecasters expect a 29% drop in dairy receipts in 2015, as well as a 27% decline for hogs.
We are seeing some decline in production costs. The USDA is forecasting a 3% drop in input costs, the first time we have seen that since 2009. Yet, Young says it is going to be a rough economic ride for most farmers for the next few years, “I think we are going to have to talk about having open and frank conversations with our landlords as we work on cash rents and share rent rates and things of that nature.