The U.S. Farm Economy Page: 1 of 6
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Order Code RS21970
Updated January 12, 2006
CR8 Report for Congress
Received through the CRS Web
The U.S. Farm Economy
Randy Schnepf
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Summary
Forecasts of two key indicators of U.S. farm well-being -net farm income and the
debt-to-asset ratio - suggest a third consecutive robust year for the U.S. agricultural
sector in 2005. However, 2005 is likely to see a 13% decline in net farm income to
$71.5 billion (still second largest on record) following two consecutive years of record
receipts, expenses, and income for the U.S. farm economy. Record production expense
($221.9 billion) driven by a surge in the cost of fuel and fertilizer, as well as higher
interest charges, are expected to more than offset continued strong cash receipts of
$239.6 billion and an $9.4 billion jump in direct government payments to $22.7 billion,
according to income forecast data from USDA's Economic Research Service (ERS).1
Farm asset valuation at $1,592 billion and total farm debt at $213 billion are also
projected at record levels in 2005. The debt-to-asset ratio of 13.4 represents a fourth
consecutive year of decline (to a 44-year low), suggesting a strong financial position for
the agricultural sector as a whole. This report will be updated as events warrant.
Introduction
Two indicators that measure the economic well-being of the farm economy are net
cash income and net farm income. Net cash income compares cash receipts to cash
expenses. As such, it is a cash flow measure representing the funds that are available to
farm operators to meet family living expenses and make debt payments. Net farm income
differs from net cash income by including the value of home consumption, changes in
inventories, capital replacement, and implicit rent and expenses related to the farm
operator's dwelling that are not reflected in cash transactions during the current year. Net
farm income is a value of production measure, indicating the farm operator's share of the
net value added to the national economy within a calendar year, independent of whether
it is received in cash or a noncash form. Net cash income is generally less variable than
net farm income. Farmers can manage the timing of crop and livestock sales and of theCongressional Research Service + The Library of Congress
'ERS's 2005 farm sector income forecast was last updated on Nov. 3, 2005, and is available at
the Farm Income and Costs Briefing Room, "Farm Sector Income," at [http://www.ers.usda.gov/
Briefing/FarmIncome/nationalestimates.htm].
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The U.S. Farm Economy, report, January 12, 2006; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc816767/m1/1/: accessed April 23, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.