	Introduction

The U.S. farm sector is vast and varied. 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. USDA's 2019 Farm Income Forecast

In the first of three official U.S. farm income outlook releases scheduled for 2019, ERS projects that U.S. net farm income will rise slightly in 2019 to $69.4 billion, up $6.3 billion (+10%) from last year. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+4.7%) to $95.7 billion. However, the initial 2019 net farm income forecast is below (-18%) the 10-year average of $84.8 billion and represents continued agriculture-sector economic weakness since 2013's record high of $123.8 billion. Selected Highlights

Since the record highs of 2012 and 2013, net cash income and net farm income have fallen by 29% and 44%, 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 2013-2014. Government payments in 2019 are projected down (-17%) from 2018 at $11.5 billion—due largely to lower payments under both the Market Facilitation Program (MFP) and revenue-support programs ( Figure 16 ). Global demand for U.S. agricultural exports ( Figure 22 ) is projected at $141.5 billion in 2019, down 1% from 2018, due largely to a decline in sales to China. Farm asset values and debt levels are projected to reach record levels in 2019—asset values at $3.1 trillion (+1.5%) and farm debt at $427 billion (+3.9%)—pushing the projected debt-to-asset ratio up to 13.9%, the highest level since 2002 ( Figure 28 ). The record harvest and abundant supply, coupled with the sudden loss of China as the principal buyer of U.S. soybeans in 2018, have pressured soybean farm prices lower (-8%) to a projected $8.60/bushel for the 2018/2019 marketing year—the lowest farm price since 2006 ( Figure 6 ). Both wheat and upland cotton farm prices are projected up slightly from 2017 despite relatively abundant stocks-to-use ratios, largely on the strength of international demand. The trade dispute has resulted in lower purchases of U.S. agricultural products by China in 2018, with continued diminished prospects for 2019. This growth in protein production was preceded by strong growth rates in 2018: beef (+2.6%), pork (+2.9%), broilers (+2.2%), and eggs (+2.1%). In addition, both U.S. and global milk production are projected to continue growing in 2019. The resulting continued expansion of beef supplies pressured market prices lower in 2016. In 2019, crop sales are projected at $201.7 billion, up slightly from 2018 ( Figure 12 ). Projections for 2019 and percentage changes from 2018 include: 
Feed crops—corn, barley, oats, sorghum, and hay: $58.8 billion (+4.0%); Oil crops—soybeans, peanuts, and other oilseeds: $39.5 billion (-6.6%); Fruits and nuts: $32.9 billion (+8.2%); Vegetables and melons: $18.6 billion (+0.9%); Food grains—wheat and rice: $12.4 billion (+6.2%); Cotton: $8.3 billion (+6.5%); and Other crops including tobacco, sugar, greenhouse, and nursery: $29.8 billion (+2%). In contrast, government payments are expected to represent 16% of the projected net farm income of $69.4 billion. Government payments in 2018 were inflated by unexpected payments of approximately $5.2 billion under the MFP initiated by USDA in response to the U.S.-China trade dispute. MFP payments to qualifying agricultural producers were estimated at $5.7 billion in 2018 and are projected at $3.5 billion in 2019, thus accounting for a year-to-year difference of -$2.2 billion. USDA ad hoc disaster assistance, at $1.4 billion, is projected up (+20.4%). MFP and ad hoc disaster assistance payments are expected to add $6.8 billion, or about 12%, to net farm income in 2018 and $4.9 billion, or about 8%, to net farm income in 2019. Payments under the Agricultural Risk Coverage and Price Loss Coverage programs are projected lower in 2019 at $1.7 billion compared with an estimated $3.0 billion in 2018 (see "Price Contingent" in Figure 16 ). No payments are forecast under the marketing loan program in 2019, the same as in 2018, as program crop prices are expected to remain above most farm-bill loan rates through 2019. The new Dairy Margin Coverage program is expected to make $600 million in payments in 2019, up from $188 million under the previous milk Margin Protection Program (MPP) in 2018 (see next section for details). 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. threshold ( Figure 17 ), thus increasing the likelihood of DMC payments in 2019. Production Expenses

Total production expenses for 2019 for the U.S. agricultural sector are projected to be up slightly (+0.6%) from 2018 in nominal dollars at $372.0 billion ( Figure 18 ). Agricultural Trade Outlook

U.S. agricultural exports have been a major contributor to farm income, especially since 2005. Key U.S. Agricultural Trade Highlights

USDA projects U.S. agricultural exports at $141.5 billion in FY2019, down slightly (-1%) from $143.4 billion in FY2018. 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. High-valued exports are forecast at $94.3 billion for a 66.6% share of U.S. agricultural exports in FY2019 ( Figure 24 ). U.S. Farm and Manufactured Agricultural Product Export Shares

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 were 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 25 ). Farm Asset Values and Debt

The U.S. farm income and asset-value situation and outlook suggest a relatively stable financial position heading into 2019 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 1.5% in 2019 to a nominal $3.1 trillion ( Table A-3 ). Nominally higher farm asset values are expected in 2019 due to higher real estate values (+1.8%), which offset a slight decrease in nonreal estate values (-0.1%). Total farm debt is forecast to rise to a record $426.7 billion in 2019 (+3.9%) ( Table A-3 ). 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 nonfarm investments, jobs, and other links to the nonfarm economy. Average farm household income (sum of on- and off-farm income) is projected at $115,588 in 2019 ( Table A-2 ), up 4.3% from 2018 and below the record of $134,164 in 2014. About 18% ($20,365) of total farm household income is from farm production activities, and the remaining 82% ($95,223) is earned off the farm (including financial investments). Total vs. Farm Household Average Income

Since the late 1990s, farm household incomes have surged ahead of average U.S. household incomes ( Figure 30 ). In 2017 (the last year for which comparable data were available), the average farm household income of $113,495 was about 32% higher than the average U.S. household income of $86,220 ( Table A-2 ). USDA Farm Income Data Tables
 Table A-1 to Table A-3 present aggregate farm income variables that summarize the financial situation of U.S. agriculture.
This report uses the U.S. Department of Agriculture's (USDA) farm income projections (as of March 6, 2019) and agricultural trade outlook update (as of February 21, 2019) to describe the U.S. farm economic outlook. According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $69.4 billion in 2019, up $6.3 billion (+10%) from last year. The forecast rise in 2019 net farm income is the result of an increase in gross returns (up $8.5 billion or +2%)—including continued payments under the trade aid package announced by USDA in July 2018—partially offset by slightly higher production expenses (up $2.2 billion or +0.6%). Net farm income is calculated on an accrual basis. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+4.7%) to $95.7 billion.
The 2019 net farm income forecast is substantially below (-18%) the 10-year average of $84.8 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 in 2018, diminished export prospects due to an ongoing trade dispute with China, and burdensome stocks.
Government payments are projected down nearly 17% from 2018 at $11.5 billion—due largely to lower market facilitation payments by USDA. Market facilitation payments to qualifying agricultural producers—in response to the U.S.-China trade dispute—were an estimated $5.2 billion in 2018 and are projected at $3.5 billion in 2019. Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) payments are also projected lower in 2019 ($1.7 billion) versus 2018 ($3.0 billion). Payments to dairy producers under the new Dairy Margin Coverage (DMC) program are projected up over 200% at $600 million, while payments under conservation and disaster assistance are projected up in 2019 at $4.3 billion (+8.6%) and $1.4 billion (+20%).
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 were estimated 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 lower U.S. export prospects slightly (-1%) in 2019.
In addition to the outlook for slightly higher farm income, farm asset value is also projected up 1.5% from 2018 to $3.1 trillion. However, aggregate farm debt is projected record large at $426.7 billion—up 3.9% from 2018. Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. USDA farmland values are projected to rise 1.8% in 2019, similar to the increases of 1.9% in 2018 and 2.3% in 2017. Because they comprise such a significant portion of the U.S. farm sector's asset base (83%), 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 32%.
The outlook for below average 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 uses the U.S. Department of Agriculture's (USDA) farm income projections (as of March 6, 2019) and agricultural trade outlook update (as of February 21, 2019) to describe the U.S. farm economic outlook. According to USDA's Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at $69.4 billion in 2019, up $6.3 billion (+10%) from last year. The forecast rise in 2019 net farm income is the result of an increase in gross returns (up $8.5 billion or +2%)—including continued payments under the trade aid package announced by USDA in July 2018—partially offset by slightly higher production expenses (up $2.2 billion or +0.6%). Net farm income is calculated on an accrual basis. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+4.7%) to $95.7 billion.
The 2019 net farm income forecast is substantially below (-18%) the 10-year average of $84.8 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 in 2018, diminished export prospects due to an ongoing trade dispute with China, and burdensome stocks.
Government payments are projected down nearly 17% from 2018 at $11.5 billion—due largely to lower market facilitation payments by USDA. Market facilitation payments to qualifying agricultural producers—in response to the U.S.-China trade dispute—were an estimated $5.2 billion in 2018 and are projected at $3.5 billion in 2019. Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) payments are also projected lower in 2019 ($1.7 billion) versus 2018 ($3.0 billion). Payments to dairy producers under the new Dairy Margin Coverage (DMC) program are projected up over 200% at $600 million, while payments under conservation and disaster assistance are projected up in 2019 at $4.3 billion (+8.6%) and $1.4 billion (+20%).
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 were estimated 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 lower U.S. export prospects slightly (-1%) in 2019.
In addition to the outlook for slightly higher farm income, farm asset value is also projected up 1.5% from 2018 to $3.1 trillion. However, aggregate farm debt is projected record large at $426.7 billion—up 3.9% from 2018. Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. USDA farmland values are projected to rise 1.8% in 2019, similar to the increases of 1.9% in 2018 and 2.3% in 2017. Because they comprise such a significant portion of the U.S. farm sector's asset base (83%), 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 32%.
The outlook for below average 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.