Net farm income will likely fall for the fourth straight year in 2017, and the farm debt-to-asset ratio is rising. Even with a modest recovery in agricultural income in 2018 and beyond, pressure on farm finances is expected to continue.
The good news? Grain and milk prices could see slight increases in 2017.
Those projections summarize the latest analysis of national and global agricultural trends from the University of Missouri’s Baseline Briefing Book released in March. Based on market information available in January, the comprehensive report is prepared annually by economists with the Food and Agricultural Policy Research Institute and the MU Agricultural Markets and Policy team.
“The world is an uncertain place, and commodity markets will continue to be volatile,” said Patrick Westhoff, director of FAPRI. “We use our models to develop a range of projected market outcomes that takes into account some major sources of uncertainty about future supply and demand conditions.”
The report gives policy-makers, farmers, agribusinesses and the public an overview of the state of the U.S. farm economy and serves as a point of reference for policy analysts, he said.
FAPRI’s most recent briefing includes declines in corn and wheat acreage and production in response to price decreases caused by record crops in 2016. Corn prices are projected to increase to $3.60 per bushel for the 2017–18 marketing year and $3.71 per bushel from 2018 to 2026. Meanwhile, shifts in relative prices are likely to push up soybean and cotton acreage in 2017. Strong export demand has supported soybean and cotton prices in 2016–17, and soybean prices are projected to average $9.57 per bushel in 2017–18.
Cattle and hog prices are expected to decrease due to large domestic supplies. Although milk prices have dipped since 2014, stronger international markets could buoy prices in 2017.
Other key results from the report include:
- Net farm income has declined by 48 percent since its 2013 peak. It may likely increase in 2018 and later years.
- Lower farm income and rising interest rates result in lower projected land prices and farm asset values. The debt-to-asset ratio increases from 11 percent in 2012 to nearly 14 percent in 2017 and 16 percent in 2026.
- Agricultural risk coverage payments are expected to decline rapidly, largely because of reduced guarantees tied to moving averages of past market prices.
- Crop insurance net outlays are projected to average about $8 billion per year for fiscal years 2018–2026.
The full report is available at www.fapri.missouri.edu.