U.S. Farm Income Outlook for 2018
Released: 2018-12-11T00:00:00

Summary:
According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $66.3 billion in 2018, down over $9 billion (-12%) from last year. The forecast decline in 2018 net farm income is the result of a small increase in gross returns (up $5.8 billion or +1.3%)—including the initial tranche of payments under the trade aid package announced by USDA in July 2018—offset by higher production expenses (up $14.9 billion or +4.2%). Net farm income is calculated on an accrual basis. Net cash income (calculated on a cash-flow basis) is also projected lower in 2018 (-8%) to $93.4 billion.
The 2018 net farm income forecast is substantially below the 10-year average of $86.9 billion (in nominal dollars)—primarily the result of the outlook for continued weak prices for most major crops. Commodity prices are under pressure from a record soybean and near-record corn harvest and from diminished export prospects due to an ongoing trade dispute with China. U.S. farm income experienced a golden period during 2011 through 2014 due to strong commodity prices and robust agricultural exports. Most crops and livestock product prices remain significantly below the average for 2011-2014, when prices for many major commodities attained record or near-record highs. Net farm income is projected down 46% since its record high of $123.7 billion in 2013. Net cash income is projected down 31% from its 2013 high of $135.6 billion. Farm-sector production expenses have risen 2.5% over that same period, thus contributing to lower aggregate income totals.
Government payments are projected up nearly 18% from 2017 at $13.6 billion—the highest total since 2006 and due largely to market facilitation payments by the U.S. Department of Agriculture (USDA) of approximately $4.6 billion in response to the U.S.-China trade dispute. Ad hoc disaster assistance and crop insurance indemnity payments were also larger in 2018.
Since 2008, U.S. agricultural exports have accounted for a 20% share of U.S. farm and manufactured or processed agricultural sales. In 2018 total agricultural exports are forecast up 2% at $143.4 billion. However, abundant supplies in international markets, strong competition from major foreign competitors, and the ongoing U.S.-China trade dispute are expected to shift trade patterns and diminish U.S. export prospects in 2019.
In spite of the lower farm income outlook, farm wealth is projected up 1.4% from 2017 to $3.0 trillion. Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. Farmland values are projected up 1.9% in 2018 following a 2.3% rise in 2017. Because they comprise such a significant portion of the U.S. farm sector's asset base (81%), change in farmland values is a critical barometer of the farm sector's financial performance. At the farm household level, average farm household incomes have been well above average U.S. household incomes since the late 1990s. However, that advantage has narrowed in recent years. In 2014, the average farm household income (including off-farm income sources) was about 77% higher than the average U.S. household income. In 2017 (the last year with comparable data), that advantage is expected to decline to 27%.
The outlook for lower net farm income and relatively weak prices for most major program crops signals the likelihood of continued relatively lean times ahead. The U.S. agricultural sector's well-being remains dependent on continued growth in domestic and foreign demand to sustain prices at current modest levels. In addition to commodity prices, the financial picture for the agricultural sector as a whole heading into 2019 will hinge on both domestic and international macroeconomic factors, including interest rates, economic growth, and consumer demand. This report incorporates USDA's November 30, 2018, farm income projections and its November 29, 2018, U.S. agricultural trade outlook update.

subsections: section_title: Introduction
paragraphs: The U.S. farm sector is vast and varied. It encompasses production activities related to traditional field crops (such as corn, soybeans, wheat, and cotton) and livestock and poultry products (including meat, dairy, and eggs), as well as fruits, tree nuts, and vegetables. In addition, U.S. agricultural output includes greenhouse and nursery products, forest products, custom work, machine hire, and other farm-related activities. The intensity and economic importance of each of these activities, as well as their underlying market structure and production processes, vary regionally based on the agro-climatic setting, market conditions, and other factors. As a result, farm income and rural economic conditions may vary substantially across the United States. 
Annual U.S. net farm income is the single most watched indicator of farm sector well-being, as it captures and reflects the entirety of economic activity across the range of production processes, input expenses, and marketing conditions that have prevailed during a specific time period. When national net farm income is reported together with a measure of the national farm debt-to-asset ratio, the two summary statistics provide a quick and widely referenced indicator of the economic well-being of the national farm economy.
section_title: USDA's 2018 Farm Income Forecast
paragraphs: According to ERS, U.S. net farm income is forecast at $66.3 billion in 2018, down 12% from last year ( Table A-1 ). This forecast includes the first round of payments under the trade aid package announced by USDA in July 2018. Under the initial phase of the trade aid package, USDA expects to provide about $4.7 billion in direct payments to qualifying agricultural producers.
The forecast decline in 2018 net farm income represents continued agriculture-sector economic weakness since 2013's record high of $123.8 billion. Abundant domestic and international supplies of grains and oilseeds suggest a fourth straight year of relatively weak commodity prices in 2018 ( Figure A-1 through Figure A-4 , and Table A-4 ). 
subsections: section_title: Selected Highlights
paragraphs: The net farm income forecast for 2018 is substantially below the 10-year average of $86.9 billion ( Figure 1 ). In both nominal and inflation-adjusted dollars, the 2018 forecast is the lowest since 2016 ( Figure 2 ). Net cash income is also projected lower in 2018 at $93.4 billion (-8%). Since the record highs of 2012 and 2013, net cash income and net farm income have fallen by 31% and 46%, respectively ( Figure 1 ), thus continuing a general downward trend in farm income since 2013—primarily the result of a significant decline in most farm commodity prices since the 2013-2014. Cash receipts for most major field crops (feed grains, hay, and wheat), oilseeds ( Figure 11 ), and animal products (beef, pork, broilers, eggs, and milk; Figure 13 ) have declined since 2013-2014 as U.S. and global grain and oilseed stocks and animal herds have rebuilt. Government payments in 2018 are projected up (+18%) from 2017 at $13.6 billion ( Figure 15 )—highest since 2006. Payments under the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs are projected lower due to record corn and soybean yields and slightly stronger farm prices compared with 2017. However, USDA's trade aid program—market facilitation program—is expected to provide $4.7 billion in direct payments that more than offset declines in other program payments. Ad hoc disaster assistance and crop insurance indemnity payments were also larger in 2018. Total production expenses for 2018 ( Figure 16 ), at $369.1 billion, are projected up from 2017 (+4.2%), driven largely by feed, fuel, labor, and interest costs. Global demand for U.S. agricultural exports ( Figure 20 ) is projected at $141.5 billion in 2019, down 1% from 2018, due largely to a decline in sales to China under the U.S.-China trade dispute. Farm asset values and debt levels are projected to reach record levels in 2018—asset values at $3.0 trillion (+1.4%) and farm debt at $410 billion (+4.2%)—pushing the projected debt-to-asset ratio up to 13.5%, the highest level since 2003 ( Figure 26 ).
section_title: U.S. Agriculture Outlook: 2018 Overview
paragraphs: In January 2018, USDA reported 2017 fall winter wheat plantings (which would be harvested as part of the 2018 wheat crop) at 32.7 million acres—the lowest level since 1909. The low winter wheat planted acres reflected poor profitability when compared with soybeans. U.S. soybean plantings have been steadily expanding out of the traditional Corn Belt—the fertile zone stretching from Ohio westward through Indiana, Illinois, Iowa, southern Minnesota, and northern Missouri to the eastern half of Nebraska and Kansas—and into the Central and Northern Plains. 
Heading into the 2018 spring planting period, USDA weather reports in early February indicated increasingly dry conditions across the southern tier of the United States and the northern plains ( Figure 3 ). Those dry conditions persisted through much of the early growing season. Such dry conditions generated considerable concerns for producers with no or little access to irrigation. They were also of significant concern to the U.S. cattle sector, which depends on spring and early summer grazing across the Northern and Southern Plains and on cheap and abundant feed grains through the remainder of the year. In contrast to the Plains states, the major growing zones of the Corn Belt and Southeast received favorable weather through the growing season, contributing to USDA's forecast for large harvests of corn, soybeans, rice, and cotton in 2018.
Through the summer months, abundant rainfall occurred throughout the primary temperate crop growing zone stretching from the Dakotas and Kansas eastward to Ohio. By harvest time in September and October, many major crop-producing states found themselves with surplus moisture and wet conditions that delayed harvest ( Figure 4 ).
subsections: section_title: Large Corn and Soybean Crop Prospects Dominate Markets
paragraphs: Corn and soybeans are the two largest U.S. commercial crops in terms of both value and quantity. For the past several years, U.S. corn and soybean crops have experienced remarkable growth in both productivity and output, thus helping to build stockpiles at the end of the marketing year. This has been particularly true for soybeans, which have seen rapid growth in yield, acres planted, and stocks ( Figure 6 ). This pattern continued into 2018 when, for the first time in history, U.S. soybean plantings (at 89.145 million acres) narrowly exceeded corn plantings (89.140 million acres). The record soybean plantings, coupled with record yield (52.1 bushels/acres), are expected to produce a record U.S. soybean harvest of 4.6 billion bushels and record ending stocks in 2018. The record harvest and abundant supply are expected to pressure soybean farm prices lower (-8%) to a projected $8.60 per bushel for the 2018/2019 marketing year—the lowest farm price since 2006. 
For corn, USDA forecasts a record national average yield of 178.9 bushels/acre (up 1.3% from the previous year's record yield). As a result, the United States is expected to produce the second-largest corn harvest on record at 14.6 billion bushels. Despite the near-record production, USDA predicts that record large domestic usage (including for livestock feed, ethanol production, other industrial processing, and seed) plus record exports (2.45 billion bushels) will result in a reduction in corn ending stocks, a decline in the ending stocks-to-use ratio to 11.5% (down from 14.5%), and a slightly higher season average farm price of $3.60/bushel ( Figure 5 ).
The corn and soybean crops provide important inputs for the domestic livestock, poultry, and biofuels sectors. In addition, the United States is traditionally one of the world's leading exporters of corn, soybeans, and soybean products—vegetable oil and meal. During the recent five-year period from 2013/2014 to 2017/2018, the United States exported 49% of its soybean production and 15% of its corn crop. As a result, the outlook for these two crops is critical to both farm sector profitability and regional economic activity across large swaths of the United States as well as in international markets. However, a tariff-related trade dispute between the United States and several major trading partners (in particular, China) has cast considerable uncertainty over the corn and soybean markets. 
The trade dispute has resulted in sharply lower purchases of U.S. agricultural products by China in 2018, with continued diminished prospects for 2019. China was the top export market for U.S. agricultural products in 2017 with $25.9 billion in purchases. With the realization of diminished Chinese purchases, USDA has revised downward its expected export value to China for 2018 to $20.5 billion and for 2019 to $13.6 billion. Similarly, USDA has lowered its U.S. soybean export forecast from its initial estimate of 2.3 billion bushels in May 2018 to 1.9 billion bushels in its December 2018 WASDE report. The marketing year extends through August 2019. Thus, these forecasts depend on whether the trade dispute continues unabated or how the terms of any resolution (if one were to occur) would impact trade in the first eight months of 2019.
section_title: Livestock Outlook for 2018
paragraphs: USDA's January 2018 Cattle report reported that U.S. cattle herd expansion, which has been growing since 2015, has slowed markedly but is still projected to grow through 2018. Similarly, U.S. hog and poultry flocks have been growing and are expected to continue to expand in 2018. 
Record profitability among cow-calf producers in 2014 coupled with then-improved forage conditions helped to set off the beef cow herd expansion ( Figure 7 ). The continued cattle expansion through 2018—despite weakening profitability—is primarily the result of a substantial lag in the biological response to the strong market price signals of late 2014. 
During the 2007-2014 period, high feed and forage prices plus widespread drought in the Southern Plains—the largest U.S. cattle production region—had resulted in an 8% contraction of the U.S. cattle inventory ( Figure 7 ). Reduced beef supplies led to higher producer and consumer prices, which in turn triggered the slow rebuilding phase in the cattle cycle that started in 2014 (see the price-to-feed ratio for steers and heifers, Figure 8 ). The resulting continued expansion of beef supplies pressured market prices lower in 2016. The lower price outlook is expected to persist through 2019, despite strong domestic and international demand across all meat categories—beef, pork, and poultry ( Table A-4 ). 
For 2018, production of beef (+2.8%), pork (+2.9%), broilers (+2.4%), and eggs (+2.2%) are projected to expand relatively robustly. Production is projected to continue to grow at strong rates in 2019: beef (+3.3%), pork (+5.3%), broilers (+1.7%), and eggs (+1.5%). Fortunately for producers, USDA projects that combined domestic and export demand will continue to grow for red meat (+4.2%) and poultry (+1.8%), thus helping to support prices and profit margins into 2019.
The changing conditions for the U.S. livestock sector may be tracked by the evolution of the ratios of livestock output prices to feed costs ( Figure 8 ). A higher ratio suggests greater profitability for producers. The cattle-, hog-, and broiler-to-feed margins all moved upward in during 2014 but have exhibited substantial volatility during the 2015-2018 period. The hog, cattle, and broiler sectors remain profitable. However, continued production growth of between 2% and 3% for red meat and poultry suggests that prices are vulnerable to weakness in demand. Milk prices and the milk-to-feed ratio fell sharply during 2018, suggesting eroding profitability. While this result varies widely across the United States, many small or marginally profitable producers face continued financial difficulties. In addition, both U.S. and global milk production are projected to continue growing in 2018. As a result, milk prices could come under further pressure in 2019, although USDA is currently projecting milk prices up slightly in 2019.
With respect to the federal milk margin protection program (MPP) instituted by the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79 ), the formula-based milk-to-feed margin used to determine government payments fell below the $8.00 per hundredweight (cwt.) threshold needed to trigger payments in early 2018. However, in September the margin moved back above $8.00 ( Figure 9 ). The MPP margin differs from the USDA-reported milk-to-feed ratio shown in Figure 8 but reflects the same market forces.
section_title: Gross Cash Income Highlights
paragraphs: Total farm sector gross cash income for 2018 is projected to be up (+1.5%) to $423.0 billion, driven by increases in government payments (+17.9%) and farm-related income (+5.2) ( Figure 10 ). Cash receipts from crop and livestock production are up slightly (+0.7%) at $374.9 billion ( Table A-1 ). 
Projected farm-sector revenue sources and revenue shares include crop revenues (47% of sector revenues), livestock receipts (42%), government payments (3%), and other farm-related income, including crop insurance indemnities, machine hire, and custom work (8%).
subsections: section_title: Crop Receipts
paragraphs: Total crop sales peaked in 2012 at $231.6 billion when a nationwide drought pushed commodity prices to record or near-record levels. In 2018, crop sales are projected at $199.2 billion, down slightly from 2017 ( Figure 11 ). The crop sector includes 2018 projections (and percentage changes from 2017) for the following commodity groups: 
Feed crops—corn, barley, oats, sorghum, and hay: $57.82 billion (+4.8%); Oil crops—soybeans, peanuts, and other oilseeds: $42.8 billion (+3.8%); Food grains—wheat and rice: $11.6 billion (+3.5%); Fruits and nuts: $30.6 billion (-1.7%); Vegetables and melons: $18.0 billion (-8.5%); Cotton: $7.9 billion (-1.0%); and All other crops—including tobacco, sugar, greenhouse, and nursery crops: $29.3 billion (+2.7%).
section_title: Livestock Receipts
paragraphs: The livestock sector includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector grew steadily from 2009 to 2014, when it peaked at a record $212.8 billion. However, the sector turned downward in 2015 (-11.0%) and again in 2016 (-14.1%), driven largely by projected year-over-year price declines across major livestock categories ( Table A-4 and Figure 13 ). In 2017, livestock sector cash receipts recovered with year-to-year growth of 8.1% to $176.0 billion. In 2018, strong cash receipts for the poultry and egg sector are projected to partially offset declines in cattle, hog, and dairy sales, minimizing the livestock cash receipt decline to $175.6 billion (-0.2%). Highlights include 2018 projections (and percentage changes from 2017) for the following livestock groups:
Cattle and calf sales: $66.4 billion (-1.4%), Hog sales: $20.0 billion (-5.2%), Poultry and egg sales: $46.7 billion (+9.5%), Dairy sales, valued at $35.3 billion (-7.1%), and Miscellaneous livestock, valued at $7.2 billion (+3.4%).
section_title: Government Payments
paragraphs: Government payments in 2018 are projected up 17.9% from 2017 at $13.6 billion—the highest total since 2006 and due largely to payments under the market facilitation program (MFP) by USDA of approximately $4.6 billion in response to the U.S.-China trade dispute. In July 2018, USDA announced a trade aid package including up to $12 billion in financial support designed to partially offset the negative price and income effects of lost commodity sales to major markets. In August 2018, Secretary Perdue announced details of the trade aid package that included initial direct payments of $4.7 billion to qualifying producers of seven agricultural commodities: soybeans, corn, cotton, sorghum, wheat, hogs, and dairy. The August trade aid package also included $1.2 billion in government purchases of excess food supplies and $200 million in trade promotion. 
USDA ad hoc disaster assistance ($1.6 billion, +130%) and crop insurance indemnity payments ($6.0 billion, +15%) are also expected to be larger in 2018 ( Table A-4 ). Without the MFP and ad hoc disaster assistance payments, net farm income would have been reduced by over 20% to about $60 billion in 2018. The MFP and ad hoc disaster assistance payments offset projected lower payments under the PLC and ARC revenue support programs for major field crops—down to $3.0 billion (-57%) from $7.0 billion in 2017 (see "Price Contingent" in Figure 15 ). No payments are forecast under the marketing loan program in 2018, compared with $11.9 million in 2017 and $206 million in 2016, as program crop prices are expected to remain above most program loan rates through 2018 ( Table A-4 ). The MPP for dairy is expected to make $188 million in MPP payments in 2018. 
Conservation programs include all conservation programs operated by USDA's Farm Service Agency and the Natural Resources Conservation Service that provide direct payments to producers. Estimated conservation payments of $3.9 billion are forecast for 2018, up slightly from $3.8 billion in 2017.
Government payments of $13.6 billion still represent a relatively small share (3%) of projected gross cash income of $423.0 billion in 2018. In contrast, government payments are expected to represent 21% of the projected net farm income of $66.3 billion. However, the importance of government payments as a percentage of net farm income varies nationally by crop and livestock sector and by region.
section_title: Production Expenses
paragraphs: Total production expenses for 2018 for the U.S. agricultural sector are projected to be up (+4.2%) from 2017 in nominal dollars at $369.1 billion ( Figure 16 ). Production expenses will affect crop and livestock farms differently. The principal expenses for livestock farms are feed costs, purchases of feeder animals and poultry, and hired labor. Feed costs, replacement animal costs, interest costs, and hired labor are projected up in 2018 ( Figure 18 ). Projected changes to the principal crop expenses in 2018 are mixed: fuel and land rent are projected up, while fertilizer costs are projected lower. 
A comparison of the indexes of prices paid versus prices received reveals that the prices received index generally declined from 2014 through 2016, rebounded in 2017, then declined again in 2018 ( Figure 17 ). Farm input prices (as reflected by the prices paid index) showed a similar pattern but with a much smaller decline from their 2014 peak, thus suggesting that farm sector profit margins have been squeezed since 2014.
section_title: Cash Rental Rates
paragraphs: Renting or leasing land is a way for young or beginning farmers to enter agriculture without incurring debt associated with land purchases. It is also a means for existing farm operations to adjust production more quickly in response to changing market and production conditions while avoiding risks associated with land ownership. The share of rented farmland varies widely by region and production activity. However, for some farms it constitutes an important component of farm operating expenses. Since 2002, about 38% of agricultural land used in U.S. farming operations has been rented. 
Some farmland is rented from other farm operations—nationally about 8% of all land in farms in 2012 (the most recent year for which data are available)—and thus constitutes a source of income for some operator landlords. However, the majority of rented land in farms is rented from nonoperating landlords. Nationally in 2012, 30% of all land in farms was rented from someone other than a farm operator. Total net rent to nonoperator landlords is projected to be up modestly (+2.4%) at $15.8 billion in 2018.
Average cash rental rates for 2018 are up slightly year-over-year ($138 per acre versus $136 in 2017). Although rental rates—which were set the preceding fall of 2017 or in early spring of 2018—dipped in 2016, they still reflect the high crop prices and large net returns of the preceding several years (especially the 2011-2014 period) and have yet to decline to pre-2011 levels ( Figure 19 ). The national rental rate for crop land peaked at $144 per acre in 2015. It is estimated at $138 per acre in 2018. 
section_title: Agricultural Trade Outlook
paragraphs: U.S. agricultural exports have been a major contributor to farm income, especially since 2005. As a result, the downturn in those exports that followed 2014's peak of $152.3 billion both coincided with and deepened the downturn in farm income that started in FY2015. In general, since reaching $137.4 billion in FY2011, U.S. agricultural exports have fluctuated between $130 billion and $152 billion ( Figure 20 ). 
subsections: section_title: Key U.S. Agricultural Trade Highlights
paragraphs: USDA projects U.S. agricultural exports at $143.4 billion in FY2018 (up +2% from 2017's total) but lower in FY2019 at $141.5 billion (-1%). This includes processed and unprocessed agricultural product exports. USDA also projects that U.S. agricultural imports will be up sharply at $127.6 billion (+7%) in FY2018, with a resulting agricultural trade surplus of $15.8 billion (-25%). In FY2019, U.S. agricultural imports are projected nearly unchanged at $127.0 billion, but the resultant agricultural trade surplus of $14.5 billion would be the lowest since 2007.
A substantial portion of the increase in U.S. agricultural exports since 2010 has been due to higher-priced grain and feed shipments, record oilseed exports to China, and growing animal product exports to East Asia. The top three markets for U.S. agricultural exports in FY2018 are Canada, China, and Mexico in that order. Together, these three countries have accounted for 46% of total U.S. agricultural exports during the five-year period FY2014-FY2018 ( Figure 21 ). However, their combined share is projected down to 42% in FY2019 largely due to sharply lower exports to China. From FY2014 through FY2017, China imported an average of $26.2 billion of U.S. agricultural products. However, USDA forecasts China's imports of U.S. agricultural products to decline to $20.5 billion in FY2018 and to $13.6 billion in FY2019 as a result of the U.S.-China trade dispute. The fourth- and fifth-largest U.S. export markets are the European Union and Japan, which have accounted for a combined 17% of U.S. agricultural exports during the FY2014-FY2018 period. This same share is projected to continue in FY2019 ( Figure 21 ). Thus, these two markets have shown relatively limited growth in recent years when compared with the rest of the world. The "Rest of World" (ROW) component of U.S. agricultural trade—South and Central America, the Middle East, Africa, and Southeast Asia—has shown strong import growth in recent years. ROW is expected to account for 41% of U.S. agricultural exports in FY2019.
Over the past four decades, U.S. agricultural exports have experienced fairly steady growth in shipments of high-value products ( Figure 22 ). As grain and oilseed prices decline, so will the bulk value share of U.S. exports. Bulk commodity shipments (primarily wheat, rice, feed grains, soybeans, cotton, and unmanufactured tobacco) are forecast at a 33.4% share of total U.S. agricultural exports in FY2019 at $47.2 billion. This compares with an average share of over 60% during the 1970s and 1980s. In contrast, high-valued export products—including horticultural products, livestock, poultry, and dairy—are forecast at $94.3 billion for a 66.6% share of U.S. agricultural exports in FY2019.
section_title: U.S. Farm and Manufactured Agricultural Product Export Shares
paragraphs: The share of agricultural production (based on value) sold outside the country indicates the level of U.S. agriculture's dependence on foreign markets, as well as the overall market for U.S. agricultural products. 
As a share of total farm and manufactured agricultural production, U.S. exports are estimated to account for 19.8% of the overall market for agricultural products from 2008 through 2016—the most recent data year for this calculation ( Figure 23 ). The export share of agricultural production varies significantly by product category.
At the upper end of the range for export shares, the bulk food grain export share has varied between 50% and 80% since 2008, while the oilseed export share has ranged between 47% and 58%. The mid-spectrum range of export shares includes the export share for fruit and tree nuts, which has ranged from 37% to 45%, while meat products have ranged from 27% to 41%. At the low end of the spectrum, the export share of vegetable and melon sales has ranged from 15% to 18%, the dairy products export share from 9% to 24%, and the agricultural-based beverage export share between 7% and 13%.
section_title: Farm Asset Values and Debt
paragraphs: The U.S. farm income and asset-value situation and outlook suggest a relatively stable financial position heading into 2018 for the agriculture sector as a whole—but with considerable uncertainty regarding the downward outlook for prices and market conditions for the sector and an increasing dependency on international markets to absorb domestic surpluses:
Farm asset values—which reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments—are projected to be up 1.4% in 2018 to a nominal $3 trillion ( Table A-3 ). In inflation-adjusted terms (using 2017 dollars), farm asset values peaked in 2014 ( Figure 24 ).
Nominally higher farm asset values are expected in 2018 due to strength in real estate values (+2.1%), which offset a decrease in non-real estate values (-4.4%). Real estate traditionally accounts for the bulk of the total value of farm sector assets—nearly an 81% share. Crop land values are closely linked to commodity prices. The leveling off of crop land values in 2017 reflects mixed forecasts for commodity prices (corn, soybeans, and cotton lower; wheat, rice, and livestock products higher) and the uncertainty associated with international commodity markets ( Figure 25 ). Total farm debt is forecast to rise to $409.5 billion in 2018 (+4.8%) ( Table A-3 ). Farm equity (or net worth, defined as asset value minus debt) is projected to be up slightly (+1.0%) at $2.6 trillion in 2018 ( Table A-3 ). The farm debt-to-asset ratio is forecast up in 2018 at 13.5%, the highest level since 2003 but still relatively low by historical standards ( Figure 26 ).
section_title: Average Farm Household Income
paragraphs: Farm household wealth is derived from a variety of sources. A farm can have both an on-farm and an off-farm component to its balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because of the inclusion of other stakeholders in farming—including landlords and contractors—and because farm operator households often have nonfarm investments, jobs, and other links to the nonfarm economy. 
subsections: section_title: On-Farm vs. Off-Farm Income Shares
paragraphs: Average farm household income (sum of on- and off-farm income) is projected at $111,321 in 2018 ( Table A-2 ), down 1.9% from 2017 and well below the record of $134,164 in 2014. About 17% ($18,637) of total farm household income is from farm production activities, and the remaining 83% ($92,684) is earned off the farm (including financial investments). The share of farm income derived from off-farm sources had increased steadily for decades but peaked at about 95% in 2000 ( Figure 27 ).
section_title: U.S. Total vs. Farm Household Average Income
paragraphs: Since the late 1990s, farm household incomes have surged ahead of average U.S. household incomes ( Figure 28 and Figure 29 ). In 2017 (the last year for which comparable data were available), the average farm household income of $113,495 was about 27% higher than the average U.S. household income of $89,632 ( Table A-2 ).
subsections: section_title: Appendix. Supporting Charts and Tables
paragraphs: USDA Monthly Farm Prices Received Charts
The following set of four charts ( Figure A-1 to Figure A-4 ) presents USDA data on monthly farm prices received for several major farm commodities—corn, soybeans, wheat, upland cotton, rice, milk, cattle, hogs, and chickens. The data are presented in an indexed format where monthly price data for year 2010 = 100 to facilitate comparisons. 
USDA Farm Income Data Tables
Three tables at the end of this report ( Table A-1 to Table A-3 ) present aggregate farm income variables that summarize the financial situation of U.S. agriculture. In addition, Table A-4 presents the annual average farm price received for several major commodities, including the USDA forecast for the 2018-2019 marketing year.