LegiStorm

Summary:

This report uses the U.S. Department of Agriculture's (USDA's) farm income projections (as of November 27, 2019) and agricultural trade outlook update (as of November 25, 2019) to describe the U.S. farm economic outlook for 2019. According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $92.5 billion in 2019, up $8.5 billion (+10.2%) from last year. The forecast rise in 2019 net farm income is largely the result of a 64.0% increase in government payments to the agricultural sector, with a projected total value of $22.4 billion (highest since 2005). USDA's forecast of outlays for farm support for 2019 includes $14.3 billion in direct payments made under trade assistance programs intended to help offset foreign trade retaliation against U.S. agricultural products, as well as over $8 billion in payments from other farm programs, including the Wildfire and Hurricane Indemnity Program (WHIP). Without this federal support, net farm income would be lower, primarily due to continued weak prices for most major crops. Commodity prices are under pressure from 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 farm incomes 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 at $143.4 billion (the second-highest export value on record). However, 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 (-5.5%) to a projected $135.5 billion in 2019. Farm asset value in 2019 is projected up from 2018 at $3.1 trillion (+2.3%). 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 2.1% in 2019, slightly higher than the 1.6% in 2018 but below the 3.0% of 2017. Because they comprise 83% of the U.S. farm sector's asset base, 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 $415.5 billion in 2019—up 3.5% from 2018. Both the debt-to-asset and the debt-to-equity ratios have risen for seven consecutive years, suggesting a weakening of the U.S. farm sector's financial situation. 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 2018 (the last year with comparable data), that advantage was expected to decline to 25%. USDA Farm Income Projections as of November 27, 2019 This report discusses aggregate national net farm income projections for calendar year 2019 as forecast by USDA's ERS on November 27, 2019. It is the third ERS forecast for 2019 and follows an initial forecast made on March 6, 2019, when USDA forecast 2019 net farm income at $69.4 billion, and a second forecast made on August 30, 2019, when net farm income was forecast at a much higher $88 billion, largely the result of an increase in government payments to the agricultural sector. The initial March forecast is discussed in CRS Report R45697, U.S. Farm Income Outlook: March 2019 Forecast, by Randy Schnepf. The second forecast made in August is discussed in CRS Report R45924, U.S. Farm Income Outlook: August 2019 Forecast, by Randy Schnepf.