THREE measures of financial strength of the United States farm economy all plunged last week when the US Department of Agriculture's Economic Research Service (ERS) released an updated estimate of 2009 net farm income and costs.
Net farm income was forecasted to drop 38pc to $US54 billion in 2009.
"The 2009 forecast is $9 billion below the average of the $63.2 billion in net farm income earned in the previous 10 years," according to Farm Income & Costs: 2009 Farm Sector Income Forecast, which ERS updated and released on August 27.
The report bases the decline on the agency's still preliminary net farm income estimate of $87.2 billion for 2009.
Two other measures of financial well-being also dropped: ERS reported that "net cash income is expected to fall 30pc to a level below its previous 10-year average", and "net value added" will drop from a 2008 record of $135.8 billion but should remain near the 10-year average.
In what is only slightly good news, the report forecasts a drop of $9.2 billion in expenses for farm production but notes that with the steep input price rises of 2007 and 2008, producers' costs will still be 5pc higher than they were in 2007.
Dwindling receipts from sales of livestock led the bad news with a drop of $22.2 billion predicted for 2009 (see graph). US crop producers, on the other hand, should see sales in 2009 at the second highest on record "despite an $18 billion drop, to $165 billion, following gains of more than 20pc in each of the last two years," ERS reported.
While 2008 was a volatile and sometimes giddy year for US producers, with markets and costs both up and the financial crisis taking hold, 2009 could be likened to a bad hangover.
"In 2009, crop prices have continued to decline, and prices for livestock - animals and products - have experienced sharp declines. With economic conditions deteriorating worldwide, demand for exports has trailed off, with few options available to expand marketing elsewhere. Sharply declining demand in 2009 has forced farmers to accept prices that are lower than were expected earlier in the year when production plans were made," ERS reported.
After the feed price pinch in 2008, the livestock industry has been facing softening global economies this year that have caused "lower demand for the better cuts of meat, resulting in declining revenues that more than offset declining (2009) feed costs," the report notes.
ERS predicted that receipts for feed crops, which account for 31pc of crop receipts, "are expected to decline about 18pc in 2009. The decline is led by a 19.6pc drop in corn receipts, with corn expected to account for 81.5pc of feed crop receipts in 2009."
Email a friend