AGRICULTURAL INCOME AND FINANCE -- SUMMARY                September 30, 1997

September 1997, AIS-66                                       
             Approved by the World Agricultural Outlook Board
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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 will be available 1-2 weeks following this summary release. 
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Agriculture Likely To Produce Strong 1997 Income -- Though Earnings Are Not
Expected To Equal 1996 Record

The Economic Research Service forecasts farm net cash income in 1997 to be
$54.7 billion, close to the 1990-96 average, but down from the nearly $60
billion record for 1996. Net farm income, which includes changes in farm
inventories, is forecast to be $45.9 billion, close to its 1990-96 average,
which follows a record $52 billion for 1996. Farmers will earn slightly less
from 1997 crop sales than the record $109 billion for 1996 due to expected
lower feed grain prices. Livestock receipts in 1997 will increase from the $93-billion 
attained in 1996. Higher beef cattle prices -- a product of reductions in the beef 
herd--will be the most important influence. This year should be the turnaround 
point after 3 years of steady declines in cattle and calf receipts.  With hog 
production expected to be at least as high as in 1996, hog receipts in 1997 will 
exceed the $12.6-billion achieved in 1996.

Total farm production expenses are forecast to increase less in 1997 than the
4-percent increase in 1996. Lower feed prices are the major factors dampening
production expenses. Higher prices for labor and young livestock could be among
the strongest upward pressures on farm expenses.

Farm Assets, Debt, and Equity Keep Rising

The value of farm sector business assets rose 6.2 percent in 1996 to $1
trillion. Farm asset values are expected to grow another 4.5 percent in 1997.
Farm real estate asset values are expected to continue increasing in 1997, but
slightly less than in 1996.

Total farm business debt rose by almost $6 billion during 1996, reaching nearly
$157 billion, its highest level since 1986. Total debt is forecast to rise
another $5 billion in 1997. Reduced incomes and slightly less favorable
interest rates in 1997 suggest that some farmers may find it more difficult to
service higher debt levels. However, there is little evidence that growing debt
in 1997 will precipitate widespread financial stress in the sector.

The value of farm business equity has risen for more than a decade. Significant
gains are expected in 1997 as farm asset values rise faster than farm debt.
Farm sector equity in 1997 is expected to be almost $100 billion more than in
1995, and over $300 billion greater than in 1985.

Final Estimates Show Net Value-Added and Net Farm Income Attained New Highs in
1996

Net value-added and net farm income reached record levels in 1996, rising
substantially from 1995. Net value-added for 1996 was $19.1 billion more than
in 1995, a rise of 25 percent, and $9.5 billion greater than its previous high
in 1994. The $22.6-billion rise in final output far exceeded the $3.4-billion
in out-of-pocket costs, resulting in considerably more income to be distributed
among the farm operators, farm employees, lenders, and  landlords who provide
resources to the farm sector. Net farm income, that portion of net value-added
earned by farm operators, jumped $15.4 billion from 1995 to 1996.

Although Input Expenses Were Higher in 1996, Strong Market Prices Led to Higher
Net Returns

Acres planted to major U.S. crops in 1996 were up 5.1 percent over 1995 and
were at the highest level in over 10 years. Harvested acreage also rose (4.2
percent) and was also at the highest level in 10 years. Farmers planted an
additional 11.6 percent of corn, 9.4 percent of wheat, and 2.6 percent of
soybeans. Despite production increases for many crops, prices generally
remained high. The overall prices received index for crops was up 12.5 percent
for the year. On the expenses side, the 1996 prices paid index for general
inputs rose 5.5 percent. 

For more information, contact David Peacock (202) 219-0805. 

Printed copies of Agricultural Income and Finance will be available in about 2
weeks.  Call the ERS-NASS Order Desk at 1-800-999-6779 to subscribe or purchase
copies.

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