The Farm Economy
Randy Schnepf
In 2004, net cash income for U.S. farmers is projected at $55.9 billion, down from the previous year's record $63.0 billion according to January 22, 2004, farm income forecast data from the USDA's Economic Research Service (ERS). Significantly lower direct government payments coupled with a drop off in cash receipts from livestock and a rise in production expenses more than offset projected record high returns to crop production (Table 1).
Cash receipts for crop and livestock marketings are projected at $215.0 billion in 2004, up $2.6 billion from the previous year, due to a record $114.3 billion in projected crop receipts. Feed grain, rice, soybeans and products, and cotton are projected to benefit from significantly higher prices in 2003/04 (Table 2). Livestock receipts are forecast lower, but remain above $100 billion for only the third time. Beef, pork, and poultry prices are expected to remain strong relative to recent history. Cattle prices are coming off of record highs in the 4th quarter of 2003. Although cattle prices declined sharply after the discovery of a BSE-infected cow on December 23, 2003, they have rebounded somewhat and are expected to remain firm on the strength of continued strong U.S. consumer demand.
Government payments under commodity programs are projected at about $10.3 billion in 2004, down from $17.4 billion in 2003. Projected higher market prices are expected to lower counter-cyclical payments, loan deficiency payments, and marketing loan grains in 2004. Fixed direct payments are estimated at $4.1 billion. Fixed direct payments were unusually large in calendar 2003 due to the timing of market-year payments. Ad hoc emergency assistance payments are also expected to be lower in 2004. No emergency payments have been announced for the 2004 crop. Farm disaster assistance and emergency assistance payments have figured heavily in sectoral income in 14 of the previous 15 years (1989-2003).
Total cash production expenses are forecast up about $3 billion at $185 billion in 2004 due to small increases in most input categories. Higher feed costs due to projected higher crop prices are offset by declines in the cost of purchased livestock.
Average farm-operator household income is projected down slightly at $66,732; however, this is still the second-highest level of farm household income on record.
According to ERS, total farm debt is forecast up $5.1 billion in 2004 at a record $205.4. However, the debt-to-asset ratio declines slightly at 14.6% on the strength of higher farm sector asset value, particularly real estate, machinery value, and stored crop values. The U.S. farm debt-to-asset ratio peaked in 1985 at 23.0.
Table 1. Overview of the U.S. Farm Cash Economy($ billion)
| Commodity | 2000 | 2001 | 2002 | 2003Fa | 2004Fa |
| 1- Cash receipts | 192.0 | 199.8 | 192.9 | 212.4 | 215.0 |
| Cropsb | 92.4 | 93.4 | 99.5 | 106.7 | 114.3 |
| Livestock | 99.5 | 106.4 | 93.5 | 105.6 | 100.7 |
| 2- Government paymentsc | 22.9 | 20.7 | 11.0 | 17.4 | 10.3 |
| Fixed direct paymentsd | 5.0 | 4.0 | 3.8 | 7.4 | 4.1 |
| CCPe | 0.0 | 0.0 | 0.2 | 1.9 | 0.9 |
| LDP & MLGf | 7.6 | 6.2 | 1.7 | 1.3 | 1.0 |
| Conservation | 1.7 | 1.9 | 2.0 | 2.3 | 2.7 |
| Ad Hoc & emergency | 8.6 | 8.5 | 1.3 | 3.3 | 0.6 |
| All other | 0.0 | 0.1 | 1.9 | 1.2 | 1.0 |
| 3- Farm-related incomeg | 13.8 | 14.8 | 15.4 | 15.1 | 15.6 |
| 4- Gross cash income | 228.6 | 235.3 | 219.4 | 244.9 | 240.9 |
| 5- Cash expenses | 172.1 | 176.1 | 170.2 | 181.9 | 185.0 |
| 6- NET CASH INCOME | 56.5 | 59.2 | 49.1 | 63.0 | 55.9 |
| Farm Assets | 1,203.2 | 1,255.8 | 1,304.0 | 1,360.8 | 1,403.5 |
| Farm Debt | 177.6 | 185.7 | 193.3 | 200.3 | 205.4 |
| Debt-to-asset | 14.8 | 14.8 | 14.8 | 14.7 | 14.6 |
Source: USDA, Economic Research Service, supporting data may be found at: U.S. Farm Income Data.
a. F = forecast.
b. Includes CCC loans.
c. For more information on U.S. farm programs see the CRS Agricultural Policy Briefing Book cites for Commodity Programs, Conservation and the Environment, and others.
d. Direct payments include production flexibility payments of the 1996 Farm Act through 2001, and fixed direct payments under the 2002 Farm Act since 2002.
e. CCP = counter-cyclical payments.
f. LDP = loan deficiency payments; MLG= marketing loan gains.
g. Income from custom work, machine hire, recreational activities, forest product sales, and other farm sources.
Table 2. U.S. Prices and Loan Rates for Selected Farm Commodities, 1996/97-2004/05
| Commodity | Year a | 1998/99 | 1999/00 | 2000/01 | 2001/02 | 2002/03 | 2003/04 | 2004/05Fa | Loan Rate |
| Wheat $/bub | Jun-May | 2.65 | 2.48 | 2.62 | 2.78 | 3.56 | 3.40 | 3.20-3.80 | 2.75 |
| Rice $/cwtb | Aug-Jul | 8.89 | 5.93 | 5.61 | 4.25 | 4.49 | 7.45 | 6.25-6.75 | 6.50 |
| Corn $/bub | Sep-Aug | 1.94 | 1.82 | 1.85 | 1.97 | 2.32 | 2.40-2.45 | 2.30-2.70 | 1.95 |
| Sorghum $/bub | Sep-Aug | 1.66 | 1.57 | 1.89 | 1.94 | 2.32 | 2.35-2.40 | 2.25-2.65 | 1.95 |
| Barley $/bub | Jun-May | 1.98 | 2.13 | 2.11 | 2.22 | 2.72 | 2.83 | 2.40-2.80 | 1.85 |
| Oats $/bub | Jun-May | 1.10 | 1.12 | 1.10 | 1.59 | 1.81 | 1.48 | 1.35-1.65 | 1.35 |
| Soybeans $/bub | Sep-Aug | 4.93 | 4.63 | 4.54 | 4.38 | 5.53 | 7.55 | 5.70-6.70 | 5.00 |
| Soybean oil, ¢/lbc | Oct-Sep | 19.8 | 15.6 | 14.1 | 16.5 | 22.0 | 31.3 | 24.5-28.5 | -- |
| Soybean meal, $/stc | Oct-Sep | 138.6 | 154.1 | 173.6 | 167.7 | 181.6 | 270.0 | 185-215 | -- |
| Cotton, Upland ¢/lbb | Aug-Jul | 60.2 | 45.0 | 49.8 | 29.8 | 44.5 | 62.6 | NAd | 52.0 |
| Choice Steers, $/cwte | Jan-Dec | 61.5 | 65.6 | 70.0 | 72.6 | 67.0 | 84.7 | 86.0 | -- |
| Barrows/Gilts, $/cwte | Jan-Dec | 33.5 | 34.0 | 45.3 | 45.8 | 34.9 | 39.5 | 48.5 | -- |
| Broilers, ¢/lbe | Jan-Dec | 63.0 | 58.1 | 56.2 | 59.1 | 55.6 | 62.0 | 76.0 | -- |
| Eggs, ¢/doze | Jan-Dec | 75.8 | 65.6 | 68.9 | 67.1 | 67.1 | 87.9 | 90.0 | -- |
| Milk, $/cwte | Jan-Dec | 15.43 | 14.35 | 12.32 | 14.98 | 12.11 | 12.52 | 15.80 | -- |
a. Calendar year data is for the first year, e.g., 1998/99 = 1998. F=forecast from USDA's monthly report, World Agricultural Supply and Demand Estimates (WASDE) July 12, 2004. NA = not available. -- = no loan rate. USDA's out-year 2004/05 forecast for crop prices first appeared in the May 2004 WASDE report.
b. Season average farm price from USDA, National Agricultural Statistical Service, Agricultural Prices.
c. USDA, Agricultural Marketing Service (AMS), Decatur, IL, cash price, simple average crude for soybean oil, and simple average 48% protein for soybean meal.
d. USDA is prohibited by law from publishing cotton price projections [12 U.S.C. 1141(j)(d)].
e. USDA, AMS: choice steers -- Nebraska, direct 1100-1300 lbs.; barrows/gilts -- national base, live equivalent 51-52% lean; broilers -- wholesale, 12-city average; eggs -- Grade A, New York, volume buyers; and milk -- simple average of prices received by farmers for all milk.USDA's Economic Research Service (ERS) publishes several summary data tables of historical, current, and projected indicators relevant to understanding the U.S. agricultural sector. These include:
Farm Income Data -- Includes national- and state-level data on farm income, cash receipts, production expenses, balance sheet, and government payments for 1999-2003.
Household Financial Characteristics -- Detailed information about farm operator household sources of income and wealth for 1996-2001.
Farm Structural Characteristics -- Includes both farm characteristics (such as farm size) and characteristics of the operator (such as age and education) for 1996-2001.
State Fact Sheets -- State-specific data tables that provide information on population, employment, income, farm characteristics, and farm financial indicators for each state in the United States.
Other Resources
USDA's National Agricultural Statistics Service (NASS) keeps track of farm production data, prices received, and prices paid. NASS publishes this data by commodity. In addition, NASS publishes charts and supporting data highlighting trends in U.S. agriculture -- farm numbers, land values, commodity production, etc., from the early 1900s.
USDA's Agricultural Marketing Service (AMS) continuously monitors prices at major commodity and terminal markets.
USDA's World Agricultural Outlook Board uses these and other data to make monthly supply and demand projections for major commodities. These projections are published monthly in the World Agricultural Supply and Demand Estimates (WASDE) Report.
USDA's Farm Service Agency (FSA) administers commodity support programs and publishes fact sheets describing program operations along with activity details. In addition, the FSA publishes information on various current and projected program budgetary outlays, as well as commodity specific outlays in summary Table 35 -- CCC Net Outlays by Commodity and Function.
USDA's Foreign Agricultural Service (FAS) monitors and publishes U.S. and international commodity supply and demand data international crop supply and demand (updated monthly in the WASDE report), as well as U.S. agricultural trade.
The Center for the Study of Rural America at the Federal Reserve Bank of Kansas City publishes a summary of the rural nonfarm and farm economies.
CRS Contact: Randy Schnepf (7-4277)
Page last updated July 19, 2004.
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