AGRICULTURAL INCOME AND FINANCE--SUMMARY December 23, 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 in 1997 Likely To Decline from Record Forecast for 1996 U.S. net farm income is forecast at $40 billion for 1997, down from the record $52 billion forecast for 1996 and the 1990-95 average of $43 billion. Grain prices will be lower in 1997 as world supplies increase, causing crop cash receipts to drop from the record forecast for 1996. Livestock producers are reducing the beef herd, which will moderately boost prices and help increase 1997 cash receipts for cattle. A decline in dairy receipts, however, will keep total livestock receipts close to 1996 levels. Production expenses will increase less than in recent years as lower grain prices lead to reduced feed expenses. Crop receipts are forecast at $102 billion for 1997 and $108 billion for 1996, with lower grain prices accounting for most of the projected 1997 decline. Corn has more influence on farm income than any other crop. Corn receipts in 1997 are forecast to be exceed the 1990-95 average of $15 billion, but probably will be lower than the record forecast for 1996. Livestock receipts are forecast at $92 billion for both 1997 and 1996. Farmers earn larger cash receipts from sales of cattle and calves than from any other type of crop or livestock. Beef cattle producers reduced their herds by about 2 million animals in 1996, contributing to an improved 1997 price outlook for cattle. The 1996 Federal Agriculture Improvement and Reform Act will determine for the second year in 1997 how much direct government payments farmers receive. Direct government payments are forecast at $7.6 billion in 1997, down from the $7.8 billion forecast for 1996. During 1990-95, farmers received 5 percent of their cash income from direct government payments, which averaged about $9 billion per year. Production expenses are forecast to be record high at $184 billion in 1997, but up less than half a percent from the forecast for 1996. Total production expenses, used to calculate net farm income, have increased each year since 1992, reaching $176 billion in 1995 and approaching a forecast $183 billion in 1996. Seed, feeder livestock, and fuel expenses are expected to post the largest percentage increases in 1997. Net cash income is forecast to decrease in 1997 on most farms that specialize in crops. The decline will be largely due to lower receipts rather than higher expenses. Most livestock farms are forecast to have higher 1997 incomes. For many livestock operations, lower feed expenses will be as important as increased receipts. Lower crop cash receipts will decrease net cash income in all regions in 1997, following almost universal increases in 1996. Regions heavily dependent on corn or wheat, most importantly the Northern Plains and Corn Belt, will have some of the largest declines. Farms of all sizes are forecast to have some decrease in 1997 net cash income with the largest percentage declines forecast for farms with under $250,000 in annual sales. These farms generally depend more on wheat and corn for income than the largest farms and 1997 receipts for the two commodities are forecast down. Farm assets are forecast to top $1 trillion in 1997 and 1996. Farm real estate assets are forecast to grow 7 percent in both those years while farm debt grows about 3 percent. Solvency indicators will remain favorable for the farm sector as a whole. The debt-to-asset ratio is forecast at 14.6 percent in 1997, compared with 15 percent for 1996. Printed copies of Agricultural Income and Finance Situation and Outlook will be available in about 2 weeks. For more information, contact Mitch Morehart (202) 219-0100. END_OF_FILE