Farm incomes drop to lowest in years

U.S. net farm incomes are expected to drop 38 percent in 2015, leaving the industry with the lowest net farm income numbers in the past 13 years, according to a report from the U.S. Department of Agriculture’s Economic Research Service. Frayne Olson, North Dakota State University Extension crop economist, said low commodity prices have negatively affected the farm balance sheet over the past several years and led to the drop in U.S. net farm incomes. “With what we’ve seen from historically high prices a few years ago, the cost structure for a lot of farms and ranches started to increase, land values went up, people upgraded machinery lines, and they tried to become more efficient in production, but that comes at a cost,” Olson said. He said the cost structure of agriculture has gradually risen for crop growers over the past three years, and for livestock producers, more recently over the past six months. “We’ve seen pretty rapid price drops, so gross income is dropping because prices are falling on the crop side faster and further than anyone expected,” he said. “We knew the high levels we saw in 2012 weren’t sustainable; everyone knew that – we knew they would come down. But the surprise has been how far and fast they’ve fallen. So on the production side we’ve had very good yields, which have led to low prices, putting a major squeeze on profit margins for both crops and livestock.” As in any business, tighter profit margins make it difficult to be successful, which has led to some farmers or ranchers exiting the industry...more