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U.S. farming sector facing a lean 2015

The USDA says net income could fall 32 per cent on low prices for corn and soy beans combined with higher operating costs

DES MOINES, Iowa—Net income for farmers is expected to fall by nearly 32 per cent this year as corn and soybean prices remain low and expenses creep higher, the U.S. Department of Agriculture said in a February 9 report.

While some farmers renting land at higher prices will find it an unprofitable year, the statistics are not as dire as they may sound for farmers in general, since just two years ago income was at a record high, farm economists said.

“It’s neither happy times nor is the sky falling in terms of agriculture incomes,” said Scott Irwin, an agricultural economist at the University of Illinois at Urbana-Champaign.

The Agriculture Department estimates would mean U.S. farmers would see income fall for a second year in a row. It was down 16 per cent from 2013 to 2014. The report forecasts net income at $73.6 billion in 2015, down from $108 billion in 2014. It was at a record $129 billion in 2013.

Crop receipts are expected to fall nearly eight per cent, driven by a dramatic fall in grain prices. Corn, for example, was at a record high, exceeding $8 a bushel in the summer of 2012, but is trading under $4 now. Soybeans had a similar decline. Livestock prices generally have been high, delivering exceptional profits—particularly for hog farmers—but a pig virus cut herds last year and cattle herds haven’t yet fully recovered from drought years when numbers declined.

Even as income falls, expenses for things like fertilizer and seed are rising by one-half of a per cent, the USDA said.

“There will be some farmers that do face financial stress, that’s for sure, but there’s also going to be a tremendous amount of farm payments going out,” said Bruce Babcock, professor of economics at Iowa State University.

The USDA reports show government programs that pay farmers when commodity prices are low will rise 15 per cent this year.

“It’s making it a tight squeeze for the grain farmer,” said Jerry Main, 76, who plants corn and soybeans on just under 500 acres in the southeast part of the state. “There’s a lot of negotiating going on between tenants and landlords trying to get cash rents reduced. I’m not hearing landlords are giving too much yet.”

He said farmers and landowners realize another drought or severe weather in the corn belt could push grain prices higher and change things dramatically.

Farmers who own land with a low cost of production will likely still make a profit, while those who rent land at higher prices will struggle.

Those with high costs will likely try to cut household expenses, will avoid making any large purchases for equipment and will try to cut costs for fertilizer and other inputs.

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