Farm Business * Net Cash Income Forecast To Decline in 2015
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 1 percent, on average, in 2015.
The forecast average net cash farm income (NCFI) of $92,400 for farm businesses* in 2015, a decline of 19.9 percent from 2014 ( see table), is in line with the forecast 20.8-percent decline in sectorwide 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 onfarm inventory, accounts payable, accounts receivable, and depreciation.
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 experience significant declines in average NCFI in 2015. Specifically, crop receipts are forecast to decline 8-10 percent, on average, in 2015 for farm businesses specializing in wheat, corn, soybeans, and peanuts.
In contrast to program commodities, specialty crop farm businesses (fruits, vegetables, and nursery/greenhouse) are forecast to experience an increase in average NCFI of 4.7 percent in 2015, following a 16.5-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 in net cash income on average.
After an estimated 48-percent increase in average NCFI in 2014, NCFI for farm businesses specializing in dairy is expected to decline significantly (74 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 increasing livestock purchase expenses, lead to a forecast decline in NCFI of 67 percent for hog farm businesses in 2015.
Lower marketing contract receipts and higher livestock purchase expenses drive the average NCFI forecast for poultry and egg farm businesses down almost 9 percent from 2014.
Net cash farm income for cattle farms is little changed from 2014, with receipts forecast 1 percent lower in 2015. This decline, along with higher production costs driven by increased livestock purchases, results in an expected 2.4-percent decrease in the average NCFI for beef cattle farm businesses (cattle and calves) in 2015.
All regions (see ERS resource regions) are forecast to experience lower NCFI in 2015 as well, although regional performance will vary considerably due to production specialty.
- Farm businesses in the Basin and Range are forecast to experience an 8-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 14-percent decline in average net cash income.
- In the Northern Great Plains, expected NCFI declines for mixed grain, wheat, and corn businesses contribute to an expected 11-percent decrease in average NCFI.
- Mississippi Portal NCFI is forecast to decline by 11 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 25-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 (-4 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 40-percent decrease in average NCFI in the Northern Crescent. The forecast 16-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 9 percent of U.S. farms are commercial and 31 percent are intermediate. "Residence farms" comprise the remaining 60 percent of operations. These are small farms operated by those whose primary occupation is something other than farming.