AGRICULTURAL INCOME AND FINANCE -- SUMMARY September 25, 2000 September 2000, ERS-AIS-75 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 the report will be available electronically about 1 week following this summary release. -------------------------------------------------------------------------------- Large Government Payments Underlie Slightly Higher 2000 Income Net farm income is forecast at $45.6 billion in 2000, up $2.2 billion from $43.4 billion in 1999 and $400 million dollars above the 1990-99 average of $45.2 billion. This increase is due primarily to an infusion of government assistance that is likely to surpass 1999 payments by $2.7 billion. Net cash income in 2000 is forecast at $55.4 billion, up $800 million from $54.6 billion in 1999 and $800 million above the 1990-99 average of $54.6 billion. With large supplies of most agricultural commodities and prospects for little or no near-term growth in demand, prices for major crops will likely remain low. U.S. farmers are continuing to add to large existing supplies of major field crops. This, in combination with a high volume of output from foreign competitors and weak export markets, is keeping prices low. Farmers and ranchers are also encountering higher expenses for interest, labor, and fuels. To counteract these events, Congress has enacted emergency legislation to soften these impacts and to boost bottom lines. Data from USDA's 1999 Agricultural Resource Management Study survey of producers showed 41.6 percent of all farms received government payments. Payments averaged about $17,000 for those operations receiving payments, contributing 13 percent of gross cash income earned by these farms. Total U.S. crop receipts are forecast at $94.1 billion, $900 million above 1999. This follows a combined $18-billion drop for 1998 and 1999. Livestock receipts are also forecast up, led by beef and hogs. Total expenses are forecast up about 4 percent in 2000, led by a $2.4-billion increase in fuel expenses. The two major livestock- related expenses will both increase in 2000. Feed expenses are forecast to rise just over 1 percent. Feeder livestock and poultry purchases are forecast to rise another 8.6 percent, following a 10-percent jump in 1999. Expenditures for the three major crop-related expenses - seeds, fertilizer, and pesticides - are forecast at $26.4 billion in 2000, a 2.4-percent increase over 1999. After remaining level or falling in 1999, all three expenses are forecast to rise in 2000. At the major commodity level, 1999 costs of production showed little change from the previous year. However, with substantially lower commodity prices, net returns fell. Market prices for corn, soybeans, cotton, and wheat in 1999 were substantially below the 5-year average, running more than 20 percent less for these commodities and continuing their downward trend from highs in 1996. Both the 1999 harvest and marketing year average prices were at or below the 1999 loan rate, providing a strong incentive for producers to utilize features of the loan program. Loan deficiency payments were substantially higher for these crops in 1999 than in previous years. Debt levels at the end of 2000 are expected to be unchanged from the end of 1999 as many farmers take advantage of high levels of 2000 government payments to improve their financial position by reducing debt. Despite relatively low agricultural commodity prices since 1998, the financial condition of farm operations, on average, has remained robust. One indication of the relative strength of the farm sector is reflected in the financial condition of bank farm loan portfolios. Bob McElroy (202) 694-5578 END_OF_FILE