Net cash farm income and net farm income are two popular ways to measure farm sector profitability, but they are not the same thing.
Net cash farm income tracks cash receipts and cash expenses, while net farm income includes non-cash transactions, including inventory changes, capital replacements costs, and others. Both measures have headed lower since 2013 after several years of higher income. The U.S. Department of Agriculture is forecasting that net cash farm and net farm income for 2016 will be $90.9 billion and $54.8 billion, respectively. Both amounts fall below the ten-year averages. Before the recent drops, both income measures largely trended upwards.
Between 2010 and 2013, rising crop and animal receipts helped to push net cash farm income and net farm income higher. However, prices declined for a large group of commodities in 2015 and fell further in 2016. Production expenses were forecast to contract in 2016 but not enough to offset the drop in commodity prices.
Source: NAFB News Service