Farm income to dip below last year - forecast for total livestock receipts for 1992 are at lowest level in previous four years, with 3% increase in production expenses; cash income for 1992 expected to decrease 6-8%; food and feed grain receipts expected to increase in 1992; all-fruit index increases after December 1991 freeze in California; net cash incomes in all five U.S. production regions expected to decrease, but farmers and ranchers specializing in wheat and feed grain should see improved net cash incomes in 1992 - U.S. Dept. of Agriculture, Economic Research Service Report

Agricultural Outlook, April, 1992

Farm Income To Dip Below Last Year

Major factors influencing 1992 farm income forecasts are expectations of a 3-percent drop in livestock receipts offsetting a 2-percent in increase in crop receipts, and an increase in production expenses of 3 percent. Preplanting forecasts show net cash income for 1992 of $49 to $55 billion, down 6-8 percent from the $57 billion forecast for 1991. The planting intentions report, due at the end of March, will give a better indication of likely 1992 income.

Net farm income (which includes noncash components such as the value of home consumption of farm products, income and expenses related to the operator dwelling, and depreciation) is currently forecast at $37 to $43 billion, down 3-5 percent from 1991.

Lower Receipts for Meat Sector

Total livestock receipts for 1992 are forecast down 3 percent, at $81 to $85 billion, the lowest level in 4 years. Receipts for hogs, cattle, and calves are expected to drop to 1988-89 levels.

Hog prices in 1992 are forecast to fall 18 to 20 percent. The likely increase in 1992 pork production will be unable to offset these lower prices, leaving 1992 cash receipts for hogs at $8 to $10 billion. Falling prices are also affecting cattle and calf receipts. Slightly higher 1992 production will be offset by a drop in prices of 4 to 9 percent, leaving beef receipts down 3 percent.

Poultry and egg receipts are also expected to fall in 1992, but by smaller amounts than red meats. Broiler receipts are forecast down less than 1 percent, following last year's 2-percent increase. Dairy receipts alone among livestock components are forecast to recover from 1991's low receipts, with both production and prices up slightly.

Field Crop Receipts Rebounding

Both food and feed grain receipts are forecast higher in 1992, with wheat and feed grains at the highest level in 6 years. The wheat subsector is expected to show the greatest advance, due to tightening U.S. stocks.

The wheat acreage reduction program (ARP) for the 1992 crop has been lowered from 15 to 5 percent. While winter wheat plantings for the 1992 crop were down from a year earlier, spring wheat plantings are expected up. Combined with a rebound in yields, larger production is expected. But even with a wheat production recovery, 1992 calendar-year prices are expected to average above last year. If these forecasts hold for the year, wheat receipts may increase over 30 percent, averaging $7 to $8 billion. Rice receipts are forecast up 10 to 15 percent if production rebounds to 1988 levels as expected.

Feed grains are also showing improvement over last year. Corn and sorghum calendar-year prices are forecast up, pushing feed grain cash receipts to between $19 and $21 billion, up 4 percent over 1991.

Receipts for other major field crops are expected to decline somewhat. After improving for 2 years, soybean receipts may fall 4 percent, and higher world cotton production is depressing U.S. prices.

Fruit Output Recovers, Prices Remain Strong

The all-fruit price index jumped sharply after the December 1991 freeze in California. Since the level of oranges on the market was already low at the time, prices were highly sensitive to supply shocks. Fruit and nut cash receipts are forecast up 8 percent in 1992, due in large part to strong apple prices, and increased production of apples, peaches, oranges, almonds, and pecans. This should lead to cash receipts in the range of $11 to $12 billion.

Direct government payments to farmers and ranchers have fallen each year since 1987's high of $16.7 billion. But payments could rise 6 to 8 percent in 1992. Although deficiency and diversion payments are forecast down for food and feed grains, conservation and disaster payments are both expected to rise. Conservation payments are forecast up nearly $400 million, and Secretary of Agriculture Madigan approved $995 million in disaster assistance for 1990 and 1991 crop losses.

Cash production expenses are forecast up 3 percent this year, to an average of $125 to $132 billion. Most expense components are forecast to climb an average of 2 to 5 percent, but feeder livestock and interest charges are expected to fall 4 percent. The greatest increase could come from energy, forecast up 10 percent.

Higher expenses stem mainly from increased demand. Acreage is likely to rise for food and feed grains, which will in turn increase the use of seed, fertilizers, and fuels in field operations. On the livestock side, production is forecast up, increasing the demand for feed, electricity, and machine and building operation.

Incomes Falling In All Regions...

Net cash incomes are forecast to fall in all five U.S. production regions, despite increased cash receipts in the Northeast and West. In these two regions, strong fruit and dairy receipts are causing total receipts to rise, but not enough to offset overall expense increases.

The largest percentage decline in net cash income is expected in the South, at 10 percent, where any weakening in cotton prices would have a major impact. The smallest decline is forecast in the West (Mountain and Pacific). A strong fruit sector in California and Washington, and strong wheat in the Northwest and northern Mountain states are helping to counteract lower cotton and livestock receipts and increases in cash expenses.