LegiStorm

Summary:

This report uses the U.S. Department of Agriculture's (USDA's) farm income projections (as of August 30, 2019) and agricultural trade outlook update (as of August 29, 2019) to describe the U.S. farm economic outlook. According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $88 billion in 2019, up $4 billion (+4.8%) from last year. However, the forecast rise in 2019 net farm income is largely the result of a 42.5% increase in government payments to the agricultural sector valued at $19.5 billion (highest since 2005). USDA's support outlays forecast for 2019 include nearly $11 billion in direct payments made under trade assistance programs intended to help offset foreign trade retaliation against U.S. agricultural products, as well as payments under traditional farm programs. Without this federal support, net farm income would be lower, primarily due to the outlook for continued weak prices for most major crops. Commodity prices are under pressure from large planted acreage estimates of corn and soybeans in 2019, large carry-in stocks from a record soybean and near-record corn harvest in 2018, and diminished export prospects due to the ongoing trade dispute with China. Should these conditions persist into 2020, they would signal the potential for continued dependence on federal programs to sustain the U.S. agricultural sector in 2020. Since 2008, U.S. agricultural exports have accounted for a 20% share of U.S. farm and manufactured or processed agricultural sales. In 2018, total agricultural exports were estimated up 2% at $143.4 billion. However, abundant supplies in international markets, strong competition from major foreign competitors, and the ongoing U.S.-China trade dispute are expected to shift trade patterns and lower U.S. agricultural export prospects significantly (-6%) to a projected $134.5 billion in 2019. Farm asset value in 2019 is projected up from 2018 to $3.1 trillion (+2%). Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. U.S. farmland values are projected to rise 1.8% in 2019, similar to the increases of 1.9% in 2018 and 2.3% in 2017. Because they comprise such a large portion of the U.S. farm sector's asset base (83%), change in farmland values is a critical barometer of the farm sector's financial performance. However, another critical measure of the farm sector's well-being is aggregate farm debt, which is projected to be at a record $415.7 billion in 2019—up 3.4% from 2018. Both the debt-to-asset and the debt-to-equity ratios have risen for seven consecutive years. suggesting a weakening of the financial situation for the U.S. farm sector. At the farm household level, average farm household incomes have been well above average U.S. household incomes since the late 1990s. However, this advantage derives primarily from off-farm income as a share of farm household total income. Since 2014, over half of U.S. farm operations have had negative income from their agricultural operations. Furthermore, the farm household income advantage over the average U.S. household has narrowed in recent years. In 2014, the average farm household income (including off-farm income sources) was about 77% higher than the average U.S. household income. In 2017 (the last year with comparable data), that advantage was expected to decline to 30%. USDA Farm Income Projections as of August 30, 2019 This report discusses aggregate national net farm income projections for calendar year 2019 as reported by USDA's ERS on August 30, 2019. It is an update of an initial forecast made on March 6, 2019, when USDA forecast 2019 net farm income at $69.4 billion. The initial forecast is discussed in CRS Report R45697, U.S. Farm Income Outlook: March 2019 Forecast, by Randy Schnepf.