Data released by the Department of Agriculture indicates net farm income could rise 10 percent this year to roughly $69 billion, following a 16 percent decline in 2018. But American Farm Bureau Federation Chief Economist John Newton says these early projections offer a best-case scenario.
“It’s important for folks to remember that this is a very, very early estimate of what farm income could look like in 2019. USDA assumes in this forecast record production of livestock products, they assume trend yields for many of the major field crops, and they also assume slightly higher prices for many of the commodities, except for pork and soybeans.”
Newton says there are many uncertainties that could change this outlook.
“The expectation is for slightly higher farm income in 2019, but this is still a really early estimate. A number of uncertainties remain when you think about weather conditions, you think about acreage allocations, and ultimately, we need to see these tariffs removed for us to continue to serve those key export markets.”
He says the forecast also shows a low return on assets for farmers and ranchers.
“USDA’s most recent projections have U.S. farmer, on average, return to assets of about 1.3 percent. That’s about half what you would get from the U.S. Treasury equities, and well below the average rate of return for many other financial instruments. And this is at a level that we haven’t seen since the ‘80s and 2000s. So, return on assets remains very, very low.”