AGRICULTURAL INCOME AND FINANCE--SUMMARY September 27, 1996 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. The complete text of AGRICULTURAL INCOME AND FINANCE is available 2-3 working days following release of this summary. ----------------------------------------------------------------------------- Farm Income Forecast for 1996 Above Previous 5-Year Average The forecasts of net cash income of $58 billion and net farm income of $51 billion for 1996 represent substantial increases over 1995. Net cash income averaged $53 billion between 1990 and 1995. Net farm income averaged $43 billion. Crop receipts are forecast to be a record for 1996. Even though overall livestock receipts are forecast to increase compared with 1995, cattle receipts in 1996 could be the lowest in the 1990's. Strong crop receipts are a major reason for the expected higher income. Tight worldwide grain supplies have kept grain prices relatively high while U.S. production of corn, wheat, and soybeans is expected to be larger than last year. At the same time vegetable, fruit, and greenhouse receipts should continue their steady growth. Overall, livestock receipts are expected to be up, led by hogs, poultry, and dairy producers. Financial problems may continue for beef producers. Farm Asset Growth To Continue The value of U.S. agricultural assets (excluding operator households) on December 31, 1996, is forecast at $1,012 billion, up 4.2 percent from 1995. About three-quarters of the increase is due to rising real estate values. Nonreal estate assets are expected to increase about $9 billion in 1996. Livestock and poultry values in 1996 are expected to rise after falling by nearly $13 billion in 1995. The value of crops stored and purchased inputs on hand are expected to rise in 1996 after dropping in 1995. The value of machinery and equipment is forecast to rise about $2 billion, in part due to favorable credit conditions. Farm Debt Expected To Rise Again in 1996 Total debt is projected to rise another $3-$4 billion in 1996. Total farm business debt rose by about $4 billion during 1995, reaching nearly $151 billion, its highest since 1986. The impact of this continuing increase in debt on farm incomes will be moderated by the combined effects of relatively high 1996 commodity prices and interest rates slightly lower than in 1995. Final 1995 Farm Income Down from 1994 Final 1995 farm income estimates confirm that even with record cash receipts, both net farm and net cash income were down from 1994. Net farm income in 1995 was nearly $14 billion, or 28 percent, less than 1994. Net cash income was lower by $1.7 billion, or 3 percent. Both income indicators were the lowest measured in the 1990's. The total value of 1995 crop sales was up almost $6.3 billion over 1994, despite lower production levels for most major crops. Commodities produced in 1994 and sold in calendar year 1995 made possible much of the increased crop sales value. Partially offsetting increased crop sales was a $1.3-billion decline in livestock receipts. Beef prices in 1995 were lower every month than in 1994. Increased expenses offset larger gross revenues in 1995. Major areas of increased expenses were feed, fertilizer, interest, and labor costs. Grain Crop Returns Higher in 1995, Acreage Smaller Costs and returns estimates show that higher 1995 prices led to higher returns for corn, grain sorghum, wheat, and rice, despite lower yields and higher expenses. Average barley returns above cash costs in 1995 were nearly double 1994. However, a decline in the value of soybean production, along with higher costs, caused returns above total economic costs to fall about $2-$4 per acre from 1994 to 1995. Peanut and cotton returns were also down for 1995, the result of lower yields. Acres planted to major crops in 1995 tended to decline from 1994, with the exception of durum wheat, soybeans, and cotton. Total U.S. planted acreage declined 1.7 percent. In response to favorable prices, cotton acreage has shown dramatic increases in the Southeast in recent years. Crop prices received by farmers in 1995 were up an average of 6.7 percent, but average livestock prices were down 3.2 percent. Returns to market hogs increased as a result of more favorable prices. However, feeder pig prices did not follow the upturn in market hog prices and returns to feeder pig production were down. As beef production increased and more beef moved through the market, cattle prices declined. Consequently, returns above total economic costs for beef producers declined in 1995. Printed copies of Agricultural Income and Finance Situation and Outlook will be available in about a week. For further information contact Dave Peacock at (202) 219-0805. Text of the full report will also be available electronically, For details, call (202) 219-0515. END_OF_FILE