This week, USDA sent a wave of confusion through farm country when the Office of the Chief Economist released the agency’s 2019 long-term farm income forecast data. The report shows farm income up $14 billion, a 12% increase in 2019, mostly due to declining expenses.
USDA’s long-term agricultural projections are a departmental consensus on a long-run representative scenario for the agricultural sector for the next decade, according to the OCE. The projections are based on specific assumptions about macroeconomic conditions, policy, weather and international developments, with no domestic or external shocks to global agricultural markets.
“Their long-term projection is not [the same as] their official farm income forecast,” says John Newton, chief economist for American Farm Bureau Federation. “They do a baseline and the reason they do a baseline is for the President's budget that needs to be released. A lot of people are confused because USDA put it out on social media, but it's not in their official forecast. Because of the shutdown, that report from the Economic Research Service was delayed until March 6.”
It’s pretty early to take any of the numbers with a much degree of certainty, Newton says. In the data, which can be seen here, USDA shows farm expenses declining by $5 billion. Newton isn’t sure how that can be possible.
“They show lower expenses, but at the same time, some folks have higher costs due to the tariffs. We also have higher borrowing costs, higher costs to service debt and wage rates are rising,” he says. “I don't even know where the relief on the cost side is coming from at this point. I'm sure there's a reason, you've got a lot of economists that work on this, but you know at the end of the day, it's just it's a really early projection on what could potentially happen.”
The forecasted income increase includes the second round of Market Facilitation Program payments, according to Newton.
“We know the administration has given out close to $7 billion now in those payments,” he says. “The other thing is they probably assume trend yield and a slight recovery in grain prices and maybe some recovery in some of the livestock sector.”
At the end of the day, Newton says it’s too soon to get excited about these numbers.
“We will get 2019 forecasts in March and that forecast is going to be based on USDA S&D projections from this most recent WASDE,” he says. “The University of Illinois’ balance sheets, which use current prices and trend yields, projected $50,000 to $60,000 loss, so you know I think people need to take all that into consideration. It's way too early to tell folks that they're going to be making 12% more money next year they did this year.”