From: Modern Farmer
NCFI, is predicted to have dropped 28 percent in 2015. (We’re still waiting on exact numbers, but this release is usually dead-on.) But the actual earnings of farmers are measured in a bunch of confusing ways. What does NCFI actually mean, and is this drop a problem?
NCFI, says AgProfessional, citing a USDA report from the Economic Research Service (a division of the USDA), dropped this past year by a whopping 28 percent, from $128.6 billion to $93 billion. This figure, which we’ll explain in a second, reached record highs in 2012 and 2013 and has been steadily dropping ever since, but this 2015 figure is way lower than it’s been—the lowest, in fact, since 2009. Everything’s down: dairy, hogs, broiler chickens, corn, soybeans. The median income, an easier figure to understand, is down, too: $78,284 in 2015, down from $80,620 in 2014.
A primary bit of confusion here–among thousands of other wildly confusing financial things that farmers have to deal with regularly—is the varying ways in which farmers and organizations like the USDA actually describe their earnings. Basically: The USDA has long had a difference between “farm income” and “cash income,” along with further and more easily understood differences between gross and net. (Gross income of any sort is the money a farmer took in, while net income is the gross minus expenses, which are things like the cost of feed, seeds, rent, and/or wages to employees.)
Gross cash income is the simpler one: It’s simply the total of all the money you took in, including loans or grants from the government. So earnings from a farmer’s livestock, soybeans, or heirloom green zebra tomatoes, plus government assistance, equals gross cash income.
Gross farm income, on the other hand, is tricky because it includes anything a farmer couldhave earned money from, but actually kept. That would include any of those livestock , soybeans, or heirloom green zebra tomatoes that the farmer or farmer’s family ate, plus the estimate money that a farmer could have gotten from renting out houses or land but instead kept.
Net cash income, again, is pretty simple, being basically what you’d think of as the money a farmer gets to keep. It’s the gross cash income—meaning, all the cash that comes in—minus any expenses, which would include raw materials, employees, and even payments on debt.
Net farm income is a freaking mess. It’s the gross farm income minus all kinds of guesswork, including depreciation of land or equipment, household expenses, inventory changes, and more. It is an attempt to quantify the long-term prospects of a farm, which net cash income doesn’t really do.
by Randy Schnepf, Specialist in Agricultural Policy
According to USDA’s Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $54.8 billion in 2016, down 3% from last year. The 2016 forecast represents the third consecutive year of decline and would be the lowest since 2002 in both nominal and inflation-adjusted dollars. Net farm income is calculated on an accrual basis. Net cash income (calculated on a cash-flow basis) is also projected lower in 2016, down 2.5% to $90.9 billion.
The forecast for lower net farm income and net cash income is the result of the outlook for lower crop and livestock receipts—down a combined 2.5% ($9.6 billion). The fall in cash receipts reflects continued declines in prices for most commodities compared with the period of 2011- 2013, when prices for many major commodities experienced record or near-record highs.