Farmers’ can anticipate a sharp drop in income this year, according to a new report from the U.S. Department of Agriculture.
In fact, the USDA predicts the $113 billion earned in 2014 will be the lowest amount of net farm income in five years. That’s equal to about a 14 percent fall from last year’s record amount, thanks mostly to a massive drop in crop prices.
The farm income forecast comes on the heels of the news that farmers are expected to produce record levels of corn and soybeans this year. However, that bumper crop will cause prices to slide and Midwest farmers will feel the pinch.
On the flip side, income from livestock is expected to soar. According to Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri, that’s because prices are climbing due to limited supply.
“We’ve had reduced numbers of beef cattle caused by recent droughts and a variety of other economic factors,” Westhoff said. “In the case of pork, it’s largely because of an animal disease problem that has restricted pork production.”
Indeed, the USDA report suggests production expenses will jump up an extra $14 billion – the fifth year in a row that number has increased. Westhoff says this is largely in part to the loss of cattle and hogs.
“Some of that was predictable because of higher costs for purchasing livestock,” he said. “As feeder cattle prices, for example, went up, that’s a higher cost for someone who has a feedlot.”
Westhoff says looking forward, Midwest producers – especially in the crop sector – may have to renegotiate rental rates with their landlords as current leases are likely not sustainable with the smaller amount of profits they’ll see.
USDA’s new forecast revises the net farm income projection upwards from the previous estimate, delivered in February.