US Farm Income Tumbles, but Rising Corn Prices Will Ease the Pain

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Ag's Big Economic Picture

While US GDP growth approached a 10-year high of 2.9% in 2018, the country’s agricultural sector hasn’t participated in the overall success. Farm net income stood at $91 billion last year, down 33% from 2013. That’s the sharpest five-year decline since the Great Depression in the 1930s. On a per-farm basis, net income fell on average 39% to $33,000.

Cash receipts from ag production were $373 billion in 2018. Factoring in direct government payments, such as the Agriculture Risk Coverage program, and other farm-related income, US farm gross cash income totaled $422 billion in 2018, down 7% from 2013. Some 70% of this decline came from corn, wheat, and soybeans. Falling prices have more than offset the boost to production volumes from rising yields. Still, all three of those crops remain profitable to plant on a per-acre basis, and it’s unlikely farmers will reduce planted area.

The chart above displays the rolling five-year percentage change in US farm net cash income. After a strong start to the 2010s decade, the current decline is the worst since the 1930s.

Cash receipts have held up much better from other crops and ag products, such as fruit, vegetables, and livestock, all of which have a strong domestic consumption base and are less reliant on export demand. In many cases, cash receipts have seen double-digit percentage growth in the past five years. Cash receipts from lettuce, for example, are up $1.1 billion, or 44%, and strawberry receipts gained 35%, or $900 million. Broiler chicken cash receipts rose $1.5 billion, or 5%.

Expenses also increased in the five years through 2018, to $330 billion, up 3%. Labor expenses and interest costs increased the most, by 18% and 50%, respectively. A few expenses declined, such as fuel and pesticide costs, while expenditures on seeds were essentially flat.

The picture this data paints is of a weak agricultural economy. In a low return environment, farmers have been forced to take on additional debt and burn through equity. Increases in asset values, such as land, haven’t been enough to offset the sharp decline in commodity prices. Total outstanding agricultural sector debt increased to $410 billion at the end of 2018, up by more than 25% since 2013. Several broad measures of financial health, including liquidity and solvency ratios, are flashing warning signs.

The charts above compare US farm debt (blue bars, left chart) and equity (green bars) values. Debt’s share of total assets has risen, as shown by a near 10-year high in the debt-to-equity ratio in the chart on the right.

Liquidity ratios measure the ability of the farm sector to meet current financial obligations. The debt-service ratio, which describes the share of production revenue used for interest and principal debt payments, reached a 30-year high of 0.28 in 2018. A higher debt-service ratio means that there is a higher risk that future debt payments could be missed.

Solvency ratios measure the ability of the farm sector to meet financial obligations through asset liquidation. The national farm debt-to-equity ratio, a commonly used solvency metric, rose to 15.7% in 2018, the highest value since 2009. A higher debt-to-equity ratio indicates greater financial leverage and risk of default.

Total outstanding agricultural sector debt increased to $410 billion at the end of 2018, up by more than 25% from 2013. Most of the increase in total debt was driven by loans backed by real estate (green line), which rose by 35% from 2013 to 2018. The blue line shows non-real estate debt, which includes machinery and equipment loans.

Winning and Losing States

Some of the most meaningful insights from the USDA’s Farm Income & Wealth Statistics come from parsing state-by-state economic outcomes, which have varied wildly depending mostly on the principal crops produced in each region.

The chart above displays farm net income by state. Many of the top-earning states are located in the Midwest. California, Texas, and North Carolina are also high-income states, with major production of fruits, vegetables, and livestock.

As a top corn-producing state, Iowa was predictably one of the hardest hit. Net farm income in Iowa fell by $3.9 billion, or 39%, since 2013, and crop receipts accounted for almost all of the decline. Corn contributed the most to the drop in commodity receipts, falling by $2.2 billion, or 22%; receipts from soybeans and hogs fell by $1 billion and $800 million, respectively. Government programs failed to fill the deficit for Iowa farmers, as direct payments fell 11% despite the sharp drop in primary farm income.

In Kansas, while crop and livestock sales remained relatively stable from 2013 to 2018, rising expenses were responsible for the 63% slide in net farm income to $2.3 billion. In particular, feed expenses for livestock rose by over $1 billion in the five-year period, accounting for a third of the total decline in net income. As one of the top five cattle-raising states in the US, Kansas has seen a 10% increase in production volume in the last five years. However, revenues generated by the industry have lagged, and cash receipts were up just 6%, dampened by falling cattle prices. Going forward, expect cattle producers in Kansas to cut expenses, via the herd size or feed-ration mix, to counteract the compression in margins.

The green line on the chart above is total US net farm income, which simply put is revenues minus expenses. The blue line is direct government payments to farmers and represents part of revenues. Until the mid-2000s, government payments accounted for a significant amount of total farm income. In the last decade, government payments have sagged, failing to keep pace as income levels rose and then fell.

Among major agricultural producing states, California has been relatively immune to the downturn in farm incomes. Heavy concentrations of fruit and vegetables, which account for 60% of California’s agricultural production value, have helped to bolster the Golden State’s economy. Overall, net farm income in California fell just $300 million, or 1.5%, to $18.7 billion since 2013. Most of California’s largest agricultural products, from a value perspective, held up quite well. Cash receipts generated from grapes, strawberries, and lettuce have all increased since 2013. On the expense side, labor payments jumped 28%, or $2.5 billion, but this was offset by reductions in livestock feed and other input costs.

Other states beating the farm-economy downturn include Florida, Washington, and New Jersey, all of which also have a high concentration of fresh produce production. In Florida, net farm income rose 9% in the five-year period, helped by a reduction in fertilizer and fuel expenses. Although crop cash receipts fell by 8%, including a 30% drop in sales of oranges, other farm income, including energy-lease and royalty payments, tripled since 2013.

In Washington, where net farm income rose by 22% to $3.5 billion, farmers benefited from both a decline in production expenses and a rise in crop cash receipts, especially from apples and hops. Apple receipts rose 15%, and hops receipts tripled from 2013 to 2018. Net farm income in New Jersey rose 14% to $356 million. Crop receipts in the Garden State were up $100 million, including gains for apples, peaches, and blueberries.


US net farm income has experienced one of the steepest declines since the Great Depression. Farmers and ranchers are grappling with record-high debt, and the farming’s share of the economy is at the lowest level ever. While other sectors of the US economy continue to improve, low commodity prices and terrible spring weather are placing farmers under increasing financial pressure. And the dependence on particular crops has created clear groups of winners and losers among US states.

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