WASHINGTON - A waning boom in U.S. crop prices will cut annual farm profits 27 percent this year from a record, potentially denting demand for Deere & Co. tractors and Monsanto chemicals, the government said.
Agricultural net income will be $95.8 billion, down from a revised $130.5 billion last year, the Department of Agriculture said Tuesday in its first 2014 forecast. Income for major crops including corn, soybeans and wheat will be $189.4 billion, down 12 percent, while all expenses for feed, chemicals and other items will be $348.2 billion, down 11 percent.
Flat demand for corn to make ethanol and fewer exports to China may halt gains in farmland values after a 37 percent jump since 2009, leaving farmers with less to invest. The farm law President Barack Obama signed this month also will cut government spending on agriculture, further eroding profit.
We’re looking at an era of about three, four, five, years of reduced profitability in agriculture, Matthew Roberts, an economist at Ohio State University in Columbus, said before the report was released. Without significant disruptions to crop production, by 2015, 2016, farms that expanded very rapidly over the last few years could be vulnerable, and we would see the first significant farm failures.
The slump in the value of U.S. crops will erode prosperity in Corn Belt states, harming rural business and, if sustained, may lead to a wave of farm failures for the first time in a generation, Roberts said.