Agricultural Outlook Forum 2016 Trends in Farm Household Income and Assets

Transcription

1 Agricultural Outlook Forum 2016 Trends in Farm Household Income and Assets Daniel Prager Economic Research Service February 25 th, 2016

2 Farm Household Income Has Increased Over Time 90 Median Household Income (thousands of dollars) Farm Households, $80,620 All U.S. Households, 53, Note: nominal dollars have been deflated using the GDP Implicit Price Deflator Series (GDPDEF) Average annual growth rate since 1991 Farm Households: 2.3% U.S. Households: 0.1% Sources: Agricultural Resource Management Survey ( ); Farm Costs and Returns Survey ( ); U.S. Census Bureau ( ) 2

3 Median Farm Household Income Projected 90,000 to Decline then Rebound in 2016 $81,666 80,000 $75,354 70,000 60,000 Dollars 50,000 40,000 30, F 2016F 20,000 10, ,000 $1,473 Farm Income Off farm Income Total Household Income Sources: Agricultural Resource Management Survey 2014, ERS Forecasts 3

4 Take Away Points from the Farm Sector Forecast U.S. net cash farm income expected to decrease slightly in 2016 Net cash income projections: Up slightly for most crop farms Down or flat for most livestock farms Additional stress on certain leveraged farms 2014 Farm Bill changed farm government payments Farm households rely on farm income to varying degrees Farm Income = Net Cash Farm Income Depreciation 4

5 Households exhibit varying degrees of dependence on net farm income Three main types of farms: Farming Not Primary Occupation Referred to as Residence Farms 1.22 million households Typical household loses money on farm Farm Businesses 851,000 households: 75% Intermediate, 25% Commercial Intermediate households (<$350,000 in gross cash income) Derive <10% of income from farm business on average Commercial households (>$350,000 in gross cash income) Receive three fourths of income from farming 5

6 Commercial Farms Generate the Majority of Farm Income Source: Agricultural Resource Management Survey, 2014, ERS Forecasts 6

7 Residence and Intermediate Farms Derive More HH Income from Off farm Sources 90% 84% 80% 77% 70% 60% 50% 53% Percent of farm households with positive farm income 40% 30% 37% 38% Share of total household income coming from farming for households with positive farm income (median) 20% 18% 10% 0% Residence Intermediate Commercial Source: Agricultural Resource Management Survey,

8 Government Payments (Crop Farms) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Commodity Payments (%) Conservation Payments (%) Other Payments (%) Government Payments ($) $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Note: Does not include residence farms Source: Agricultural Resource Management Survey,

9 Government Payments (Livestock Farms) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Commodity Payments (%) Conservation Payments (%) Other Payments (%) Government Payments ($) $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Note: Does not include residence farms Source: Agricultural Resource Management Survey,

10 Dairy Farms Households Receive Least Income from Off farm Sources $250 $200 Thousands of Dollars $150 $100 $50 $0 Corn Fruits and tree nuts Poultry Dairy Wage Non Wage Farm Total Source: Agricultural Resource Management Survey,

11 Fruit and Tree Nut Operators Work Least Hours On Farm Hours per Week Corn Fruits and tree nuts Poultry Dairy Operator Hours Spouse Hours Operator (off farm) Spouse (off farm) Source: Agricultural Resource Management Survey,

12 Mean Household Assets have Grown Faster for Crop Farmers $2,000 $2,000 Non farm Debt Thousands of Real Dollars $1,500 $1,000 Non farm Debt Farm Debt Non farm Assets $1,500 $1,000 Farm Debt Non farm Assets $500 Farm Assets $500 Farm Assets $ Livestock Farms $ Crop Farms Source: Agricultural Resource Management Survey,

13 Average U.S. Farm Real Estate Values have risen sharply since % average annual growth Rate % average annual growth rate Source: United States Department of Agriculture, Economic Research Service (ERS) and National Agricultural Statistical Survey (NASS) 13

14 Median Asset Holdings Highest for Cash Grain Farmers $1,400 80% $1,200 $1,000 60% 69% 65% 57% 70% 60% Thousands of Dollars $800 $600 $400 50% 40% 30% 20% $200 10% $0 Corn Fruits and tree nuts Poultry Dairy Farm Assets Non Farm Assets Percent Real Estate 0% Source: Agricultural Resource Management Survey,

15 Farm Household Income Is Volatile New analysis shows that farm households are considerably more volatile than non farm households 66% of farm households had a median income change of 50% or more. Only 9% of all U.S. households Crop farms are slightly more volatile than livestock farms Larger farms experience more income volatility But farm households rely on government payments and off farm income 15

16 Household Income Varies from Year to Year Second Period Income for Farms with Total Household Income between $75,000 and $125,000 in Year 1 Density 0 2.0e e e e e-05 Density 0 5.0e e e Second period farm income (dollars) Distribution of Farm Income Second period off-farm income (dollars) Distribution of Off Farm Income Source: ERS Analysis of Agricultural Resource Management Surveys ( ) 16

17 Income Component Variability Farm Household Income is variable Want to see how different components enter into overall variance of household income Examine changes in income from: (a) Farm Income (b) Agricultural Payments (c) Off farm wage income (d) Other off farm income Decompose the total variance into contributions from each source. 17

18 Decomposition of the Total Income Variability by Income Components Income components Net farm income Agricultural program payments Off farm wage income Other offfarm income Net farm income Agricultural program payments Non farm wage income Other non farm income Component shares, Source: ERS Analysis of Agricultural Resource Management Surveys ( ) 18

19 Conclusions Many farm households have diversified income sources; most work off farm Farm household assets have grown 51 to 68 percent of assets are in farm and non farm real estate holdings Farm household income is volatile But, off farm income and government payments reduced overall volatility Price related government payments may be even more effective at reducing income volatility Source: Agricultural Resource Management Survey,

20 Contact Information Daniel Prager, ERS/USDA (202) Household Data Pages Household Well-being Topic Page: Farm Household Income and Characteristics Data Product: Web query tool:

21 Sharp Decline Forecasted in Dairy Farm Household Income $300 $250 Thousands of Dollars $200 $150 $100 $50 $0 Corn Fruits and tree nuts Poultry Dairy Off farm Farm Farm (2016) Farm (2016) Total Total (2015) Total (2016) Source: Agricultural Resource Management Survey, 2014, ERS Forecasts 21

22 Livestock Farms at Greater Risk of Default Farms with positive farm income. Percent of income from farming. [median income] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Corn [CELLRANGE] Fruit and tree nuts Poultry [CELLRANGE] [CELLRANGE] Dairy [CELLRANGE] Distribution of Debt to Asset Ratios Corn Fruit and tree nuts Poultry Dairy 12% 5% 23% 14% <.1.1 to.4 >.4 Source: Agricultural Resource Management Survey,