FarmPolicy

July 23, 2017

FAPRI Baseline Update: Farm Income, Government Outlays- Cash Rental Rates Decline

Yesterday, the Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri, released a report titled, “Baseline Update for U.S. Farm Income and Government Outlays.”

In part, the FAPRI report stated that, “Net farm income is expected to decline for the third straight year in 2016 and is likely to remain well below recent peaks for the next several years.”

More specifically, the report noted that, “Sharply lower cattle and egg prices contribute to a $23 billion reduction in projected livestock sector receipts in 2016. Crop receipts also decline slightly, as lower prices for corn, wheat and other crops offset the impact of increased production.

“Projected net farm income declines by $10 billion in 2016, as the drop in receipts outweighs reductions in production costs.”

Other highlights of yesterday’s FAPRI update included:

“August USDA reports indicated cropland rental rates and average farm real estate values declined in 2016 after years of sharp increases. Additional declines are projected for 2017‐2019 in response to sharp reductions in crop returns relative to recent peak levels.

“With reduced asset values, the projected ratio of farm debts to assets increases from 12 percent in 2015 to 14 percent in 2019.

“Government farm program outlays peak in fiscal year 2018, when many payments associated with the 2016/17 marketing year are made.”

Table from yesterday’s FAPRI update

Meanwhile, a news release last week from University of Missouri Extension stated that, “The latest USDA cash rental survey shows decreasing rental rates in some areas of Missouri, says University of Missouri Extension agricultural business specialist Joe Koenen.

“USDA’s National Agricultural Statistics Service (NASS) released its annual survey Sept. 9. View data on Missouri counties at bit.ly/2dfym0d.

“‘Some of the better crop counties in central and north Missouri showed a decrease in rental rates, reflecting lower crop prices,’ Koenen says. Other counties remain unchanged, and pasture rates held stable or showed slight increases.”

The news release added that, “Low prices and high corn yields will put pressure on rental rates, [Koenen] says. Soybean prices dropped, but not as much as corn prices. A decrease in soybean prices also will likely affect rent prices. ‘How much is still to be determined.’

“Koenen says it is important for landowners and renters to know yields on cropland. Yields and land quality affect what the renter pays.”

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