Idaho net farm income dropped 27 percent in 2018

By Sean Ellis

Idaho Farm Bureau Federation

POCATELLO – Idaho farmers and ranchers brought in an estimated $7.18 billion in farm cash receipts during 2018, virtually unchanged from 2017’s $7.2 billion total.

But because farm input expenses increased last year, total net farm income in Idaho dropped an estimated 27 percent in 2018, according to University of Idaho’s annual “Financial Condition of Idaho Agriculture” report.

The report for 2018 was released Jan. 3 to Idaho lawmakers and it didn’t contain good news when it comes to net farm income, which is the farmer’s bottom line, or revenues minus costs.

“We’re looking at another disastrous year for agriculture for net farm income,” said UI Agricultural Economist Garth Taylor, one of the report’s authors.  

Although prices for many of Idaho’s main farm commodities are depressed, total farm cash receipts in Idaho last were basically unchanged from 2017 because production of most crops was up due to record or higher than average yields, he said.

“It is not the quantity that is going down. It is the prices that are going down,” Taylor said. “We had very good yields last year.”

“We’re still having record production and yields in almost everything we produce but prices are just terrible,” said report co-author Ben Eborn, a UI ag economist.

There are large carryover stocks of most of the state’s main farm commodities, he said. “Until we burn through that excess supply, prices aren’t going to come back up.”

Eborn and Taylor estimate that Idaho’s total farm revenue in 2018, including farm cash receipts, government payments and custom work, was $7.9 billion, unchanged from 2017.

But expenses increased 4 percent to $7 billion.

“Our crop revenues are virtually the same as they were last year,” Taylor said. “But the expenses have really skyrocketed for a lot of farmers.”

The report estimates total Idaho net farm income in 2018 at $902 million, which is a 27 percent decrease from 2017 and 60 percent below the state record for NFI, which is $2.25 billion and set in 2011.

Last year was the fifth straight year of declining net farm income in Idaho.

The 27 percent drop in NFI in 2018 follows a similar 27 percent decline in 2017, and that decrease came on top of a 7 percent decline in 2016, a 9 percent decrease in 2015 and a 3 percent decline in 2014.

If realized, Idaho’s estimated NFI total for 2018 would be the lowest since 2009, when milk prices hit a record low.

While many farmers and ranchers are hurting financially right now, agriculture remains the bedrock of the state’s economy, Taylor told lawmakers.

According to a UI study, agriculture directly and indirectly accounts for one in seven jobs in the state, 16 percent of Idaho’s total gross domestic product and 20 percent of total sales.

While there is no doubt many farmers and ranchers are struggling right now, the good news for Idaho’s economy is that ag producers spend about the same amount of money to produce their farm commodity each year, regardless of how much money they make, Taylor said.

For example, he said, cows still need to be cared for and fed regardless of whether a dairy operation is making or losing money. And a potato farmer still spends roughly the same amount of money each year on inputs to produce their spud crop.

“Whether prices are good or bad, we still employ basically the same amount of people in agriculture each year,” Eborn said. “And farmers and ranchers still purchase the same amount of inputs. The farm never sits idle, even for one year. That’s a good thing.”

The UI report estimates farm cash receipts from Idaho crops totaled $3 billion in 2018, up 5 percent over 2017. Cash receipts from livestock production are estimated at $4.2 billion, down 4 percent from 2017.

In both livestock and crop production, revenues were mostly kept up by production and not prices.

Revenue from milk, Idaho’s top farm commodity in terms of cash receipts, are estimated at $2.4 billion in 2018, down 6 percent from 2017. Production increased 2 percent but prices averaged 8 percent lower.

Revenues from beef, Idaho’s No. 2 farm commodity, totaled $1.6 billion last year, down 1 percent from 2017.

Potatoes remained the state’s No. 1 crop with estimated revenues of $864 million in 2018, a 4 percent decrease from 2017. Total potato production increased 3 percent last year and yields reached a record high of 440 hundredweight per acre, but the average potato price in Idaho was down 13 percent.

Idaho wheat revenues for 2018 are estimated at $490 million, a 16 percent increase over 2017. Production increased 15 percent over 2017 and prices increased 14 percent.

Hay revenues are projected to be $483 million, a 26 percent increase over 2017. Hay production in Idaho increased 12 percent in 2018 and prices were up 9 percent.

Considering that about 45 percent of the hay produced in Idaho is used on the farm where it was grown and is not sold, the total value of hay production in Idaho is estimated at $835 million in 2018.

Taylor and Eborn project Idaho sugar beet revenue in 2018 was up 3 percent to $302 million. Production increased 1 percent and prices increased 2 percent.

Barley revenue is projected to have increased 3 percent to $245 million. Production was up 10 percent and prices were down 6 percent.

Revenue from dry beans, which include garbanzo beans, is estimated at $74 million, which is 14 percent higher than in 2017. Yields were unchanged from 2017 and prices were down 14 percent, but acres increased by 6 percent.

The Financial Condition of Idaho Agriculture report shows that livestock remains the biggest part of Idaho agriculture. Almost 59 percent of the state’s farm cash receipts come from livestock production – milk, beef cattle, trout and sheep.

When animal feed such as hay, corn silage, feed grains and the by-products of beet pulp and potato waste is factored in, about 75 percent of Idaho’s agricultural sector involves livestock.

Farm cash receipts from livestock have surpassed crop revenue in Idaho every year since 2001, with the exception of 2009, a year of disastrously low milk prices.  

If realized, the estimated $7.18 billion in total Idaho farm cash receipts in 2018 would be 18 percent lower than the record high of $8.8 billion in 2014.

In real dollars, which is revenue that is adjusted for inflation, Idaho’s estimated farm cash receipts in 2018 are 28 percent higher than the 39-year average.

However, total Idaho NFI in 2018 is estimated to be 33 percent below the 49-year average in real dollar terms.

The 4 percent increase in estimated farm expenses in 2018 is attributed to a 3 percent increase in farm-origin inputs – feed, seed, replacement livestock purchases – and a 4 percent increase in manufactured inputs, which include fertilizer, chemicals and fuel.

Other expenses, including machine hire and custom work, marketing, storage, transportation, repairs and maintenance, were up 3 percent, and contract labor costs increased 4 percent.

One of the bright spots contained in the report is that total gross domestic product from Idaho farming increased much faster than Idaho’s total GDP from 1997-2017.

Based on data from the U.S. Department of Commerce and Bureau of Economic Analysis, Eborn and Taylor estimate that GDP from Idaho farming, adjusted for inflation, increased 142 percent during that time, while total Idaho GDP increased 81 percent.

“That’s a remarkable number,” Taylor said. “And that number doesn’t include food processing. That’s just from farming: grandma and grandpa on a tractor.”