The Food and Agricultural Policy Research Institute delivered their 2015 agricultural baseline to Congress this week. Pat Westhoff is the director of the dual university research program. He says they expect lighter pockets across the board.
“Farm income in 2015 is expected to down by about 27 percent from the 2014 level. Cost of production may be moderated a little bit; but we’ve seen a big drop in receipts for both livestock and for crops.”
How will the agricultural industry react?
Westhoff says after years of strong prices for commodities, producers will be challenged over the next few years.
“It’s going to be more important for producers to think about ways they can try to keep down their costs and try to maintain their returns as best they can in this environment. Risk management will be more important than it ever has before because of that and also, of course, as we make these farm program choices that we make the best choice possible for each operation.”
Westhoff says the 2014 Farm Bill is unlike the former farm program where payments were more or less fixed each year. Now programs are very sensitive to market conditions.
The baseline does bring good news to consumers. For the past several years, food price inflation has been faster than overall inflation in the U.S. economy.
“We’re expecting to change course in 2015-2016. Food price inflation should be less this year than it was last year. And in 2016, it could be even less than the overall inflation.”
American Farm Bureau reports that FAPRI projects USDA will pay out 3.9 billion dollars in ARC and PLC payments for the 2014 crop after Fiscal Year 2016 begins on October 1st of this year and those payments will decline to 3.4 billion in the 2018 crop year.
FAPRI reports lower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. Most livestock sector prices are expected to decline this year – according to the report.