Farm profits to fall second consecutive year

So-called farm profits – a measure including the value of inventories and adjusting for capital depreciation – will be $58.3 billion in 2015, the USDA also said.

US secretary of agriculture Tom Vilsack said despite farm income forecast to be down from record levels, rural America continued to remain stable and resilient.

USDA forecast crop receipts would decline 6% to $12.9 billion for the year, led by a projected $7.1 billion decline in corn receipts. Livestock receipts are forecast to decrease by $19.4 billion (9.1 percent) in 2015 largely due to lower milk and hog prices.

The softening outlook for farm incomes comes amid a continued downturn in the U.S. agricultural economy triggered by record corn and soybean crops in the past few years.

Both net cash and net farm income are forecast to decline for the second consecutive year after reaching recent historic highs in 2013, according to newly-released farm sector profitability forecasts published Tuesday by the U.S. Department of Agriculture.

Deere & Co., the world’s biggest farm equipment manufacturer, laid off more than 1,000 workers in Iowa and Illinois factories this year. The forecast is down 20 percent from the USDA’s February estimate of $73.6 billion.

Reduced livestock receipts are the largest contributor to the projected 36% decline in U.S.net farm income in 2015. Broiler output is expected to drop $1.7 billion to $31 billion as the industry faces less overseas demand and lower prices following the bird flu outbreak that hit South Dakota and 14 other states earlier this year.

Government forecasters expect a 29% drop in dairy receipts in 2015, as well as a 27% decline for hogs. Until now, production expenses had increased 8% annually from 2010 to 2014 and compressed grower margins. “After several years of improvement, farm financial risk indicators such as the debt-to-asset ratio are expected to increase in 2015, indicating increasing financial pressure on the sector”.

Mitch Morehart, a senior agricultural economist with the USDA’s Economic Research Service, told reporters economic conditions are generally strong among producers with most individuals able to make their debt payments or being careful not to take on too much debt compared to the value of their assets.