Wednesday, August 26, 2015

Farm income to decline in 2015, USDA projects; Iowa land values on the rise

The U.S. Department of Agriculture has projected that net farm incomes in 2015 will be down 36 percent from last year, the sharpest drop since 1983, Chris Clayton reports for DTN The Progressive Farmer. USDA projections say net farm income "would come in at about $58.3 billion in 2015, down from $91.1 billion in 2014."

In 2015, farmers "will earn 53 percent less than in 2013 when net farm income hit a record high of $123.7 billion. That would be the lowest net farm income earned since 2006," Clayton writes. "Crop receipts for 2015 are expected to be $12.9 billion less than 2014, with corn receipts down $7.1 billion, soybean down $3.4 billion and wheat down $1.6 billion." USDA "expects growers to accelerate sales of 2015 crops this year to help generate more cash, in effect moving what would have been 2016 income ahead." Livestock is also expected to decline, down $19.4 billion, 9.1 percent below 2014.

"While farmers are seeing livestock and crop receipts fall, expenses aren't declining as rapidly. Production expenses are estimated to be down $1.5 billion this year, just 0.5 percent," Clayton writes. "Until now, production expenses had increased 8 percent annually from 2010 to 2014 and compressed grower margins. All of this leads to a projected decline in farm asset values of 3.5 percent compared to 2014 while farm debt is expected to increase 5.8 percent. The primary driver for the decline in assets is lower real-estate value, which is down $49 billion from 2014, or about 2.1 percent. At the same time, debts for both real estate and non-real estate assets are up."

Despite those concerns, land values in some Midwestern states, such as Iowa, are on the rise, Marcia Zarley Taylor reports for DTN. "Actual Iowa land sales in four dozen counties tracked by the Peak Soil Index show good quality farmland surging about $500/acre since May and bouncing past year-ago levels. The index pegs Iowa farmland with a Corn Suitability Rating of 60 worth $8,284/acre, based on a 30-day moving average of actual sales recorded in county court houses," Taylor writes. "That's up from a low of $7,690 at the end of April. A year ago, the same index found Iowa farmland worth $8,043/acre." (Peak Soil graphic)

"Last week the Chicago Federal Reserve reported good quality Iowa farmland values had tumbled 7 percent below July 2014 levels, based on its own opinion survey of lenders, farm realtors and appraisers," Taylor writes. "The Fed blamed lower values on the fact that corn prices were averaging $3.65/bu. in the second quarter of 2015, 21 percent below a year ago and 48 percent below two years ago. Soybean prices at $9.63 were down 33 percent and 35 percent respectively. Pork and other livestock profits may have offset some of those grain losses, however."

"A Farm Credit Services of America benchmark study of farmland trends in its five-state area reported Iowa land values down more than 10 percent on July 1, compared to values a year earlier," Taylor writes. "It includes 'benchmark' farms with FCS America appraisers adjusting values based on its opinion of local conditions. (Read more)

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