Virginia farmers keep close watch on net income forecast

farmU.S. net farm income is expected to increase 10 percent this year, according to projections from the U.S. Department of Agriculture. But the increase follows a 16 percent drop in 2018.

The USDA projects a $5.2 billion increase to $69.4 billion in 2019 inflation-adjusted dollars. Despite the rise, net cash farm income is still expected to be the third-lowest level over the past decade.

According to USDA, the projected increase is based on higher price expectations for crop and livestock receipts.

“The forecast represents a mixed bag at best for Virginia farmers,” said Tony Banks, a commodity marketing specialist for Virginia Farm Bureau Federation. “Obviously, some enterprises like dairy, soybeans and tobacco will continue to face strong challenges in 2019; there may be opportunities for corn, fruit, vegetables, turkeys and beef.”

American Farm Bureau Federation Chief Economist Dr. John Newton said such early projections offer a best-case scenario.

“It’s important for folks to remember that this is a 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 explained.

U.S. corn cash receipts are projected to rise $2.5 billion. Cotton, fruits and nuts, and wheat also are expected to see rising cash receipts, but soybean cash receipts are expected to decline by $2.6 billion.

Livestock receipts are projected to rise for cattle and calf sales by $2.7 billion, and broilers by $100 million, while hog receipts are expected to decline by $700 million because of lower prices.

The higher net farm income projection comes at a time when many farmers continue to face headwinds in primary export markets.

While these projections suggest 2019 could be better than 2018 for many farmers, much is up in the air. Retaliatory tariffs are still in place, and recently both Mexico and the European Union threatened additional tariffs if 232 U.S. tariffs on steel and aluminum are not removed, or if auto tariffs are put in place. Additional tariffs would further erode U.S. commodities’ competitiveness in key agricultural markets and would weigh on farm income, as they did in 2018.

“A number of uncertainties remain when you think about weather conditions and acreage allocations. Ultimately, we need to see these tariffs removed for us to continue to serve those key export markets,” Newton added.

The USDA’s next update is scheduled for August. Highlights from the report are available at ers.usda.gov/topics/farm-economy/farm-sector-income-finances/highlights-from-the-farm-income-forecast.

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