AGRICULTURAL INCOME AND FINANCE--SUMMARY June 26, 1997 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 (AIS-65) will be available within 1-2 weeks following release of this summary. ------------------------------------------------------------------------------ Farm Income To Remain Strong in 1997, But Decline from 1996 Record Net farm income in 1997 is forecast to approach $45 billion, above its 1990-95 average of $43 billion, but down from the record $49 billion forecast for 1996. Lower corn receipts in 1997, due to declining prices as stocks rebuild from their mid-1990's lows, will have the largest downward influence from a year earlier. Beef cattle receipts will provide the greatest upward boost as a smaller beef herd and strong exports push up cattle prices. Livestock producers will benefit from lower feed expenses in 1997, partly because of lower corn prices. They will, however, have larger expenses for feeder animals as stronger cattle and hog markets drive up livestock prices. Crop receipts are forecast at a record $109 billion in 1996, but will likely decline to a still healthy $106 billion in 1997. Lower expected feed grain prices due to expanding world grain supplies explain most of the decline. Propelled by increased beef cattle prices, livestock receipts in 1997 are expected to rise from the $93 billion forecast for 1996 to over $95 billion. Although many farms that specialize in crops will likely have a year-to-year decline in their 1997 earnings, those specializing in soybeans will be an exception. Abundant production and continued strong prices will push 1997 soybean receipts to a record high. The lower incomes on crop farms will mostly come from lower crop receipts, not from higher expenses. In contrast, many livestock operations will see their 1997 incomes increase as producers benefit from higher cattle and hog prices and lower priced feed. Total farm production expense, used to calculate net farm income, is forecast to increase less in 1997 than last year's 5-percent rise and the 3-percent average of 1990-95. Lower feed prices are the major reason. Higher prices for labor and young livestock will provide the strongest upward pressures on farm expenses. Following an increase in 1996, commercial farms in the Northern Plains will likely have the largest percentage decline in farm income of any region. The major reason is that Northern Plains farms are expected to earn less from their wheat this year as prices dip. Lower corn receipts will also squeeze their earnings. Corn Belt farms have the best chance of not seeing a decline, following their strong increase in 1996 earnings. Though their corn earnings will decline, Corn Belt farms are diversified into commodities with expected higher returns this year, including soybeans and hogs. Lower crop receipts are forecast to lead to lower income on all sizes of farms in 1997, with mid-sized operations--those with annual sales from $100,000 to $500,000--having the largest percentage declines. Mid-sized farms depend more on corn for income than either the largest or smallest farms and 1997 receipts are forecast to decline more for corn than any other crop. Mid-sized farms make up 13 percent of all farms and produce about 60 percent of the national corn crop. The value of assets owned by America's farm sector is expected to exceed $1 trillion in 1996, and continue growing in 1997. The value of farm land and buildings, the largest share of the sector's assets, has grown rapidly in the 1990's. Farm real estate values are expected to rise 5.3 percent this year, after a 7-percent increase in 1995, and a projected 7.4-percent hike in 1996. Following recent trends, farm business debt is expected to grow about 3 percent this year, considerably below the increases in the sector's land, buildings, machinery, livestock, and other assets. Strong growth in asset value and modest expansion in farm debt foretell a rising net worth for the farm sector into the second half of the 1990's. Printed copies of Agricultural Income and Finance will be available in about 2 weeks. For more information, contact Mitch Morehart (202) 219-0100 or John Jinkins (202) 219-0798. For details on electronic access, call ERS Customer Service at (202) 219-0515. END_OF_FILE