CHICAGO, Ill. — Net farm income in the United States is expected to fall to its lowest level since 2002, but a major banker isn’t too worried about farm finances.
The U.S. Department of Agriculture is forecasting net farm income of US$55.9 billion in 2015, down 38 percent from 2014 and 55 percent below the recent high set in 2013.
Crop receipts are expected to fall by $18.2 billion from a year ago, and livestock receipts are forecast to tumble by $25.4 billion because of lower commodity prices.
“We’re transitioning now to a period where I think it’s going to be a bit more difficult for agriculture in the United States,” said Mary Mc-Bride, president of CoBank, a national co-operative bank that serves the U.S. agriculture sector.
Read Also
Alberta crop diversification centres receive funding
$5.2 million of provincial funding pumped into crop diversity research centres
She told DTN’s Ag Summit 2015 she is not overly concerned about the well-being of America’s farmers, despite the downturn in the farm economy.
“We feel generally that farmers remain in solid shape financially,” said McBride.
It’s because farm assets are up 135 percent since 2000, while farm debt has risen 100 percent.
“Overall, farmers have not over-leveraged themselves,” she said.
The steep increase in farm assets is primarily a reflection of rising land values. Slumping commodity prices will eventually drag down land values, but it hasn’t happened yet.
“We anticipate that while there won’t be great years in the next few years, they won’t be as bad as they could have been if you had too much debt,” McBride told the farmers in the audience.
The steady appreciation of the U.S. dollar has taken a toll on U.S. farm incomes because it is making U.S. grain and livestock exports less competitive in foreign markets.
The dollar has increased 20 percent since mid-2014, and McBride is forecasting it will remain strong in 2016.
“I don’t think we’re going to see other currencies weaken significantly against the dollar,” she said.
The good news for U.S. farmers is that McBride believes the bulk of the currency appreciation has already occurred.
However, there are looming concerns on both the supply and demand fronts.
Global ending stocks of soybeans and wheat are projected to reach record highs in 2015-16, which doesn’t bode well for a price rally.
On the demand side, China’s gross domestic product is projected to grow by 6.3 percent in 2016. While that would be the envy of most nations, it is a far cry from the double-digit growth witnessed in 2010.
McBride said plenty of economists believe the Chinese government is inflating its growth numbers and that the actual number is closer to three percent.
Another concern is that the U.S. is losing market share to emerging exporters such as Brazil and Ukraine. The U.S. share of world coarse grain is expected to fall to 33 percent in 2015 from 56 percent a decade ago.
McBride cautioned growers to make prudent decisions on the cost side of the ledger in 2016.
“It might be nice to have some very fancy new equipment, but it may be better just to try to get by for those next few years because it’s not going to be an easy time.”
