Agriculture Farm Crop Report 2016

Today cooking and food shows in the media are everywhere, capturing our interest. It seems like people have become obsessed with eating healthy. Mobile apps track our daily lifestyle habits and exercise routines. But eating healthy foods labelled “organic” are costly, on-average 65% more expensive than mass grown (GMO) fruits and vegetables.


Despite the cost, organic foods are the rage in posh restaurants that serve exquisite cousine. It’s pushed the education and health benefits of ALL-NATURAL farming among young, Millennials to make a difference in America’s LOCAL communities. The movement to buy local grown food is changing the science of agriculture and healthy eating habits.  

Popular shows like Anthony Bourdain, Andrew Zimmerman, Rachael Ray and Chef Gordon Ramsay are generally supporting the movement to organic foods grown locally. But it is challenging the profitability and business of farming. Report Young Farmers & Education 

The State of U.S. Farming 2016

The average U.S. farmer is experiencing both net cash and net farm income are forecast to decline for the third consecutive year after reaching recent highs in 2013 for net farm income and 2012 for net cash income. Net cash farm income is expected to fall by 2.5 percent in 2016, while net farm income is forecast to decline by 3 percent. These declines are moderate compared to the 27- and 38-percent reductions in net cash income and net farm income, respectively, that occurred in 2015. Checkout Latest USDA Crop Report 2016



  • Cash receipts are forecast to fall $9.6 billion (2.5 percent), led by a $7.9-billion, or 4.3-percent, drop in animal/animal product cash receipts, and a smaller ($1.6 billion or 0.9 percent) decline in crop receipts.
  • The expected drop in 2016 cash receipts is led by declines in nearly all major animal/product categories (including dairy, meat animals, and poultry/eggs), as well as vegetables and melons. Feed crop cash receipts are also expected to fall.  
  • While overall cash receipts are expected to decline, receipts for several commodities— including turkeys, cotton, rice, sorghum, oil crops, dry beans, potatoes, and sugarcane/sugar beets are forecast to rise by at least 1 percent in 2016.
  • Direct government farm program payments are forecast to increase in 2016 by $3.3 billion, or 31.4 percent.
  • A drop in overall production expenses is forecast for 2016, cushioning the decline in cash receipts. Notably, expenses for inputs that typically are produced by the farm sector itself, including feed, as well as livestock/poultry purchases, are expected down. Also, expenses for fuels and oils are forecast down by 14.5 percent in 2016.  If realized, the expenses across each of these three categories will have fallen for 3 straight years. In contrast, hired labor costs and interest expenses are forecast to increase by $1.5 billion (5 percent) and $1.3 billion (6.8 percent), respectively, over 2015.
  • The value of total farm sector equity is forecast down by $54.9 billion (2.2 percent) in 2016, as farm sector assets are seen declining and debt levels increasing relative to 2015. In particular, the value of real estate is forecast down by $28.8 billion (1.2 percent) and the (inventory) value of crops, animals/animal products, and purchased inputs down by $12.9 billion (6.7 percent) relative to 2015.
  • The balance sheet changes result in a worsening of farm solvency measures, which nevertheless remain near historic lows. Liquidity positions have likewise deteriorated, on average.

Is Organic Always Good 

Value of Ag Production Forecast To Fall for Third Straight Year

The annual value of U.S. agricultural sector production is expected to fall 2.1 percent to $417.3 billion in 2016, due to declines in the value of both crop and livestock production (see table on value of production). The value of production is comprised primarily of cash receipts adjusted for any changes in inventories and home consumption, plus all farm-related income. If realized, the falling value of crop production (to a forecast $183.5 billion in 2016) would represent a third consecutive decline from 2013’s record high of $233.2 billion, and a fourth straight year of declining crop receipts. The forecast reduction in crop value of production for 2016 reflects both lower cash receipts and the sale of crop inventories. The value of U.S. livestock production is also forecast to decline 4.6 percent (to $181.4 billion) in 2016 as lower prices are expected to lead to a second consecutive large drop in receipts.

The value of agricultural production is also affected by changes in commodity insurance indemnities received by the farm sector. Corn, soybeans, and wheat accounted for over 70 percent of 2015 Federal crop insurance indemnities. Weather (yield loss) events were few and prices relatively stable in the 2015 crop year, so the loss ratio (gross indemnities relative to total premiums) is forecast to be lower than in recent years. Commodity indemnities (and farm premiums) for all crops are expected to increase slightly in 2016, reflecting lower crop prices and yields, increased uptake of the Stacked Income Protection Plan (STAX) and Supplemental Coverage Option (SCO), and the expansion of USDA’s Pasture, Rangeland, and Forage insurance policy.

Crop Prices and Receipts Forecast To Decline Modestly in 2016

Crop cash receipts—the cash income from crop sales—are forecast to fall 0.9 percent ($1.6 billion) in 2016 as prices continue to decline for most field crops. Cash receipts for corn and soybeans—historically the crops generating the highest crop cash receipts—are both expected to be fairly flat in 2016. Since hitting a record high in 2012, corn receipts are forecast to fall 36 percent through 2016, primarily due to lower prices. While production is expected to increase slightly in 2016, continued weakening in corn prices is expected to more than offset production gains, leading corn cash receipts to fall by $0.8 billion in 2016. In contrast, increases in soybeanproduction are expected to outweigh small price declines, leading soybean cash receipts to increase 1.5 percent in 2016. After falling sharply in 2015, rice cash receipts are expected to increase 31.5 percent ($0.7 billion) in 2016 on higher expected production and prices. 

Vegetable and melon cash receipts are expected to have the largest decline among all crop commodities in 2016, falling 7.2 percent ($1.4 billion). Dry bean and potato receipts are expected to increase 5.3 percent and 5.8 percent, while cash receipts for all other vegetables and melons are forecast to decline more than 11 percent. While prices are expected to be slightly lower in 2016, the drop in cash receipts for all other vegetables and melons is primarily driven by an expected decline in the production of processed vegetables. Processed tomatoes, which represent three-fourths of processed vegetable production, are the biggest driver of the decline, with area planted in California projected to fall.

Despite a small projected decrease in production, cash receipts for fruits and nuts are expected to remain stable in 2016 due to higher expected farm prices. Grapefruit and orange production is expected to fall as citrus greening disease has resulted in unmarketable fruit throughout Florida and elsewhere. California has historically accounted for a large portion of U.S. vegetable and fruit/nut cash receipts, and continued drought conditions may affect fruit/nut, vegetable cotton, and rice production going forward (for more information, see the ERS drought page).

See data on value of crop production and crop cash receipts.

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Animal/Animal Product Receipts Forecast Sharply Lower in 2015 and 2016

Animal/animal product cash receipts increased by 43.8 percent in real terms from 2005 to 2014, but are estimated to have declined by 12.5 percent in 2015 and are expected to fall an additional 4.3 percent in 2016 (to $181.4 billion) in nominal terms. The 2015 falloff reflects price and cash receipt declines for most major commodities, including dairy, hogs, broilers, and cattle/calves. In 2016, prices are expected to fall for all major animal and animal product commodities.

After reaching a record high of $49.3 billion in 2014 and falling 28.2 percent in 2015, milk receipts are expected to drop another 6.4 percent in 2016 as declining prices continue to outweigh an expected increase in milk production. Cash receipts from cattle production are also expected to decline for a second consecutive year in 2016, falling 3.9 percent as cattle/calf prices are expected to decline further. Hog production is expected to continue rising in 2016 as the industry recovers from the porcine epidemic virus (PEDV) in 2014. However, hog prices are expected to drop again in 2016 following a sharp decline in 2015, leading to a 5.1-percent drop in 2016 hog cash receipts.

Poultry and egg cash receipts are expected to fall 4.1 percent in 2016, due primarily to a decline in egg receipts. Poultry and egg receipts were broadly affected by the highly pathogenic avian influenza (HPAI or “Bird Flu”) in 2015, although the impacts on individual commodities are mixed. Since being detected in December 2014, HPAI has claimed 49.7 million birds, with turkeys and egg laying chickens suffering the largest loss in numbers. Turkey and chicken egg quantities are both forecast to have declined in 2015, placing upward pressure on prices and leading to higher cash receipts for both commodities.

Following 2015’s sharp rise, egg prices are expected to decline in 2016, outweighing an expected rebound in production and leading cash receipts to fall by $2.0 billion. In contrast, higher turkey production is expected to lead turkey cash receipts 5.3 percent ($0.3 billion) higher, despite a small projected drop in turkey prices. U.S. broilerproduction is expected to increase in both 2015 and 2016. The increase in broiler production—coupled with HPAI-related import bans on U.S. poultry by some nations—has increased U.S. supply and led broiler prices sharply lower in 2015. Broiler prices are expected to continue declining in 2016 as production increases, leading to a modest decline in broiler cash receipts.

See data on value of animal/products production and animal/product cash receipts.

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Falling Prices Are Behind Forecast Drop in Farm Cash Receipts

Cash receipts across all commodities are expected to fall by nearly $9.6 billion in 2016. As in 2015, this decline largely reflects falling commodity prices rather than changes in production, which are lower for a broad set of agricultural commodities in 2016 relative to recent years. To add perspective to the forecast change in cash receipts, the overall change for 2016 relative to 2015 can be decomposed into separate price and quantity effects for those commodities where we forecast both prices and quantities, including soybeans, tobacco, peanuts, sugar beets, hay, potato, sunflower, flax, cottonseed, dry beans, barley, rapeseed, rye, canola, oats, mustard seed, safflower, sugarcane, sorghum, long-staple cotton, rice, wheat, upland cotton, and corn, fruits and nuts, vegetables and melons, hogs, broilers, milk, farm chickens, turkeys, eggs, and cattle/calves. For these commodities, we calculate a price effect by applying the 2016 forecast prices to the 2015 production, suggesting that 2016 cash receipts would be $17.7 billion lower due to prices alone. The production effect is calculated across the same group of commodities and suggests that if 2016 production occurred under 2015 prices then cash receipts would be $7.4 billion higher. Cash receipts from the remainder commodities where separate prices and quantities are not available alone are expected to add $0.7 billion to 2016 cash receipts.

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Direct Government Farm Payments Forecast To Increase in 2016

Direct government farm program payments are forecast to rise by 31.4 percent in 2016 to $13.9 billion (see table on government payments). The new Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs, introduced in the 2014 Farm Bill, are expected to account for almost two-thirds of direct payments to farm operations. Payments under both of these programs are contingent on a producer’s prior enrollment of “base” acreage, and prevailing conditions. PLC program payments are based on current commodity prices and whether they are below a reference price, while payments under the ARC program are based on county-average revenues relative to a 5-year Olympic average. (Upon enrollment, farmers enrolling in ARC could have instead elected to calculate revenues relative to their own Olympic average, although few did.) The large forecast increases in 2016 payments from 2015 reflect expected declines in seasonal average crop prices. Corn base acres are expected to receive about two-thirds of ARC payments in 2016, with soybeans and wheat combined receiving another 32 percent. Almost 80 percent of PLC payments in 2016 are expected to go to peanuts, wheat, and long-grain rice.

Marketing Loan Gains (MLGs) and Loan Deficiency Payments (LDPs) in 2016 are expected to increase due to expectations of declining prices for upland cotton and peanuts. Few payments are expected for participants in the Margin Protection Program (MPP) for Dairy Producers; after netting fees and premiums paid, the program will return $25 million to the U.S. Government. 

Supplemental and Ad Hoc Disaster Assistance payments are forecast to decline substantially in 2016, due to a large forecast decline in Livestock Forage Program (LFP) payments. Conservation payments, reflecting Farm Service Agency (FSA) and Natural Resource Conservation Service (NRCS) programs, are expected to be about the same, while the expected increase in payments from the USDA’s energy program BCAP (Biomass Crop Assistance Program) reflect increases in its budget appropriation. 

The February 2016 forecast is revised downward from the November 2015 forecast, mostly due to a large downward adjustment in expected outlays for the Dairy Margin Protection Program (MPP).

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2-Year Decline in Production Expenses First Since 1985 and 1986

Multi-year reductions in farm production expenses are infrequent; it happened last over 1984-86. The $3.8-billion (1 percent) forecast decline in 2016 follows an estimated $10.1-billion decline in 2015. Before then, production expenses increased, on average, 9 percent annually (in nominal terms) from 2010 to 2014. Changes in input (expense) prices typically lag commodity price upswings and downswings. In 2016, the drop in expenses is expected to alleviate, but not completely offset, the drop in cash receipts, and ultimately lead to tighter margins.

See data on production expenses.

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The forecast decline in expenses for 2016 is driven primarily by lower spending on feed, fuel, and fertilizer, which outweigh expected increases in spending on hired labor, interest, and property taxes/fees.

  • Despite the expectation of more cattle in 2016, feed expenses are forecast $2.7 billion (4.7 percent) lower due to lower feed prices.
  • Livestock and poultry purchases are forecast to decline by 6.5 percent ($2.0 billion) in 2016 due to lower feeder cattle and barrow/gilt prices.
  • Fuel and oil expenses are forecast to decrease by over 14 percent to $10.7 billion in 2016. This reflects the Energy Information Agency’s forecast of the price of diesel and gasoline fuel, both projected down over 27 percent in 2016. Fuel and oil expenses show a similar decline in 2015.
  • Seed, pesticide, and fertilizer expenses, which are the principal inputs into crop production, together are expected to decrease by about $1 billion in 2016, driven primarily by lower fertilizer expenses.
  • Labor costs are expected to increase in 2016 by over 3 percent, with most of the increase driven by higher expected wage rates impacting hired labor.
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In percentage terms, the largest forecast increase in farm production expenses is for interest outlays, projected up for the second year based on increases in farm debt and higher interest rates. Interest paid on debt secured by real estate is expected to increase by 4.4 percent in 2016, to $11.8 billion. Interest payments for nonreal estate debt are also expected to increase by 10.6 percent based on continued demand for operating and other types of nonreal estate loans. This follows an estimated 20-percent increase in nonreal estate interest expense in 2015.

Net rent expense—the amount paid to rent land, adjusted for the landlord’s share of government payments and insurance indemnities and net of any expenses paid by the landlords—is forecast to increase by 2.9 percent to $21 billion in 2016. As in recent years, the majority of net rent expense is forecast to be paid to nonoperator landlords as opposed to landlords who are also operators.

Property taxes and fees—which include real estate and personal property taxes, as well as motor vehicle registration and licensing fees—are expected to increase by 1.8 percent to $15.8 billion in 2016.

Payments to Stakeholders Expected To Increase in 2016

In 2016, payments to stakeholders are forecast to increase by $3.3 billion (4.8 percent), while net value added is forecast to rise by 1.3 percent. Net value added represents the sum of economic returns to all the providers of factors of production. Net value added is distributed among stakeholders who receive a fixed ­payment in return for their services and equity owners who share in the profits (net farm income). Stakeholders provide the hired labor, leased capital, and rental land used in agricultural production, but in most cases do not directly share risk in the short term. An exception is landlords who sign operators to share-rent agreements. Consequently, the payments that stakeholders receive can be more stable over time than net returns to the equity owners of agricultural production.

See data related to payments to stakeholders.

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James Dean