AGRICULTURAL INCOME AND FINANCE -- SUMMARY December 23, 1997 December 1997, AIS-67 Approved by the World Agricultural Outlook Board ----------------------------------------------------------------------------- This SUMMARY is published by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20036-5831. The complete text of AGRICULTURAL INCOME AND FINANCE will be available online 1-2 weeks following this summary release. Printed copies will be available in February, 1998. ----------------------------------------------------------------------------- Farm Income Prospects Appear Favorable for 1997 and 1998 Net farm income is forecast near $46 billion for both 1997 and 1998, above the average for the 1990s ($44 billion), but below the record $52 billion for 1996. The decline is due mainly to slightly lower expected receipts and a modest increase in expenses. Net cash income earned by farm operators, which excludes changes in farm inventories and non-cash income and expenses, is expected to be about $54.5 billion in 1997 and 1998, slightly better than the 1990s average, although down from the record of nearly $60 billion achieved in 1996. Net value added, the economic returns to all providers of resources to production agriculture (farm employees, landlords, lenders, in addition to the farm operator), is expected to be around $89 billion in both 1997 and 1998, exceeded only by the $95 billion achieved in 1996. Cash receipts will remain relatively high in 1997 and 1998, even though they are unlikely to repeat the unusually favorable circumstances of 1996, when higher than average prices for major field crops remained strong even as large crops were being harvested. Crop and livestock receipts in 1997 are forecast to decline a modest $1.6 billion from the 1996 record of $202 billion. Farm marketings for 1998 are expected to remain near the 1997 forecast of about $201 billion. The 1998 expectations are, of course, subject to considerable variability depending primarily on weather patterns over the critical spring and summer months and how export demand unfolds over the year. Uncertainty regarding the export market, triggered by the unstable economic situation in Asia, will be particularly important to farm income prospects for 1998. Export forecasts for Southeast Asia and South Asia have been adjusted downward for 1998. Crop receipts are expected to trend downward in 1997 and in 1998. Corn represented about one-fifth of the record crop receipts in 1996. Average corn prices through October 1997 have been well below prices in 1996 and smaller exports appear to have contributed to the lower corn receipts in 1997. In contrast, livestock receipts are expected to about equal the year-earlier total of $93 billion in 1997 and increase in 1998. The upward trend, which started with 1996, reverses the downward trend experienced from 1993 to 1995. Total farm production expenses for are expected to grow in 1997 but at a slower annual rate than during 1993-1996. Expenses for 1998, however, could stabilize at or slightly below the 1997 level. The value of U.S. farm business assets is expected to exceed $1 trillion in 1997 and continue growing in 1998. The value of farm real estate, the largest share of the sector's assets, increased 5.9 percent during 1997 and is expected to grow 5 percent in 1998. Farm business debt is expected to grow more than 3 percent in both 1997 and 1998, much slower than the rate of growth of farm business assets. The strong growth in farm assets and modest expansion in farm debt imply a rising net worth (equity) for the farm sector in 1997 and 1998. The debt-to-asset ratio is forecast at 14.8 percent in 1998, compared with 15.0 percent in 1997. The debt-to-asset ratio indicates the relative dependence of farm businesses on debt and their ability to use additional credit without impairing their risk-bearing ability. A lower debt-to-asset ratio indicates improved financial solvency conditions for the farm sector. For information about the report's content or related information, contact David Peacock (202) 694-5582. Printed copies of the report will be available in about 2 weeks. To order, call 1-800-999-6779. For further information about ERS products and services, please call the ERS Information Center at (202)694-5050. END_OF_FILE