USDA Revises Downward, Net Farm Income To Plunge In 2009

USDA says that net U.S. farm income for 2009 will plunge 38% to $54 billion, due to lower commodity prices for crops and livestock, Reuters reports.

Net farm income is a USDA measurement of the value of production during the calendar year, whether it is sold or held in storage.

The 2009 forecast was $9 billion below the 10-year average of $63.2 billion in net farm income. The drop comes amid a global recession that has suffocated demand for many U.S. commodities, pushing prices well below their 2008 averages.

USDA said cash receipts for most crops are expected to drop by $40.3 billion, led by a 19.6% cut in corn receipts. Grain and livestock prices falling from record highs set in 2008 means farmers will see earnings slump by $33.2 billion in 2009, from last year’s near record net farm income of $87.2 billion.

Livestock, dairy, and poultry cash receipts are forecast to drop by 15.7% to $119 billion. Crop receipts would still be the second-highest on record in 2009, despite an $18 billion drop to $165 billion.

One positive in the farming sector is that expenses are forecast to decline from a record high posted last year, marking the first time costs have dropped since 2002. Overall, expenses are expected to edge lower by $9.2 billion, or 3.2%, in 2009 to $280.8 billion, the second highest level ever.

The government also said direct government payments are expected to total $12.6 billion in 2009, a slight increase from $12.2 billion in 2008. This would be 20% below the 2004-2008 average.

Analysts say the news is dimming prospects for sales of companies that make agricultural equipment. Boenning &
Scattergood analyst Ryan M. Connors said that net farm income is a key sales driver.
Connors called the USDA’s decision to lower its income forecast, its second such downward revision this year, troubling news for equipment makers.