Farm Business * Net Cash Farm Income Forecast To Decline in 2015
The forecast average net cash farm income (NCFI) of $86,800 for farm businesses* in 2015, a decline of 24.7 percent from 2014 ( see table), is in line with the forecast 27.7-percent decline in sector wide NCFI. NCFI represents the amount of cash available to service debt, pay family living expenses, and make investments. It is not a comprehensive measure of profitability, however, since it does not account for changes in farm inventory, accounts payable, accounts receivable, and depreciation.
- Average NCFI for farm businesses is expected to decline nearly 25 percent in 2015 to $86,800, the lowest level since 2011 in nominal terms, and the lowest since 2010 in real terms.
- Farm businesses that specialize in livestock are forecast to undergo declines in average NCFI in 2015 following significant increases during 2014 for some farm types, notably dairy and cattle/calves. NCFI on hog and poultry farms have now declined for 2 consecutive years, due to lower prices.
- All types of crop farm businesses except for specialty crops are forecast to experience a second consecutive year of declines in average NCFI, with a third consecutive year of declines for mixed grain and other field crop farms.
- Farm businesses are expected to see reduced costs for many major expense categories, including feed, fuel, and fertilizer costs. Cash expenses are expected to decrease about 2 percent, on average, in 2015.
Net Cash Farm Income To Decline for Most Farm Specialties in 2015
After record production in 2014, production of program crops (crops eligible for farm commodity program payments) is expected to decline in response to lower prices in 2015. Farm businesses specializing in program crops are forecast to endure substantial declines—between 23.6 and 32.4 percent based on the crop—in average NCFI in 2015.
In contrast to program commodities, average NCFI for specialty crop farm businesses (fruits, vegetables, and nursery/greenhouse) are forecast to increase 5.1 percent in 2015, following a 16.6-percent increase in 2014. Specialty crop receipts are forecast to increase by about 1 percent in 2015, while total cash expenses are forecast to decline slightly.
Average NCFI forecasts for farm businesses specializing in livestock production are expected to decline in 2015, with hog and dairy farms showing the greatest reductions on average in 2015. Record high milk prices led to a 48-percent increase in average NCFI in 2014 for farm businesses specializing in dairy; however, their average NCFI is expected to decline significantly (70 percent) in 2015. Reduced dairy marketing contracts and receipts are forecast to pressure incomes, with only minimal relief from lower expenses. Large decreases in hog and crop receipts, coupled with inventory being rebuilt after the Porcine Epidemic Diarrhea (PDV), led to a forecast decline in NCFI of 53 percent for hog farm businesses in 2015. Lower cash receipts and replenishment of layer hens in the face of Highly Pathogenic Asian Avian Influenza a (H5N1) drove the average NCFI forecast for poultry and egg farm businesses down almost 23 percent from 2014. Net cash farm income for beef cattle farms is expected to be down from 2014, with receipts forecast 5 percent lower in 2015. This decline, along with higher production costs driven by increased livestock purchases, results in an expected 13-percent decrease in the average NCFI for beef cattle farm businesses (cattle and calves) in 2015.
Average Farm Business Income is expected to Fall for All Resource Regions in 2015
All regions (see ERS resource regions) are forecast to experience lower NCFI in 2015, although regional performance varies considerably due to the strong geographic concentration of certain production specialties.
- Farm businesses in the Basin and Range are forecast to experience a 14-percent decrease in average NCFI, largely due to declining receipts for sorghum and wheat, and reduced marketing income from cattle and dairy. For farm businesses in the Prairie Gateway, lower wheat and cotton receipts result in a forecast 11.6-percent decline in average NCFI.
- In the Northern Great Plains, expected NCFI declines for mixed grain, wheat, and corn businesses contribute to an expected 19-percent decrease in average NCFI.
- Mississippi Portal NCFI is forecast to decline by 17 percent in 2015, based on regional specialization in cotton/rice, soybeans, peanuts, and mixed grains.
- Expected NCFI declines for corn, hog, and dairy farm businesses contribute to the expected 31-percent decrease in average NCFI for Heartland farm businesses.
- Expected declines in poultry and hog receipts drive lower projected average NCFI in the Eastern Uplands (-12 percent), while increasing livestock costs and decreasing crop receipts drive the decline in the Southern Seaboard (-20 percent).
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- The forecast drop in dairy NCFI contributes to an expected 41-percent decrease in average NCFI in the Northern Crescent, the largest percentage decline across regions. The forecast 17-percent decline in NCFI for the Fruitful Rim is also driven by the expected drop in NCFI for dairy farms in 2015.
*Farm businesses are defined as operations with gross cash farm income of over $350,000 (labeled "commercial") or smaller operations where farming is reported as the operator's primary occupation (labeled "intermediate"). Approximately 10 percent of U.S. farms are commercial and 31 percent are intermediate. "Residence farms" comprise the remaining 59 percent of operations. These are small farms operated by those whose primary occupation is something other than farming.