U.S. agriculture is headed for the third year in a row of far-above-average income, estimated the Agriculture Department on Tuesday. Lower market prices for corn, soybeans, cotton, hogs, broiler chickens and eggs will combine with rising expenses to pull down net farm income by nearly $26 billion from the record set last year, said USDA economists.
If realized, the USDA forecast of $136.9 billion in net farm income, a measure of profitability, would be the third-highest on record, behind $162.7 billion in 2022 and $140.9 billion in 2021. It would be 40 percent higher than the 10-year average of $99.4 billion annually.
The step down in farm income would be part of the economy-wide slowdown expected this year. The Conference Board, a think tank, forecasts a brief recession and a tepid inflation-adjusted growth rate of 0.2 percent this year, compared to 2 percent in 2022. Other forecasters say the growth rate will be higher but they agree the rate will be lower than in 2022.
“I am not surprised that their 2023 estimates are down—hard to top a record like that,” said analyst Joe Glauber of the IFPRI think tank, referring to USDA’s farm income forecast. “The early season estimates are full of uncertainty and with ongoing war and tight (grain) stocks, I suspect that they may end up a lot different by the end of the year.”
Commodity prices surged in reaction to the Russian invasion of Ukraine nearly a year ago. They are expected to decline as the world adjusts to smaller grain exports from the Black Sea region.
USDA’s farm income forecast was similar to an estimate last fall by the FAPRI think tank at the University of Missouri. In its September forecast, FAPRI said there would be another decline in 2024 with net farm income at a plateau in the following years. The think tank will release an updated set of projections in March.
“I don’t think I see reasons to quarrel with most of the big picture stories in terms of direction of changes in 2023 vs. 2022,” said FAPRI director Pat Westhoff on Tuesday. High inflation in 2022 was a complicating factor in assessing the magnitude of change in farm income, he said.
Although farm expenses were forecast to rise by 4 percent, while cash receipts for crops and livestock would fall by 4 percent, farm sector equity would rise by 5 percent this year. Farm assets would increase by $199 billion, to $4.05 trillion, at the same time that debts rose to $535.1 billion, an increase of $31.2 billion. The debt-to-asset ratio, a widely used gauge of financial stability, would worsen modestly to 13.2 percent, a low level of stress.
Corn and soybean receipts were forecast to fall by a combined $9.3 billion from 2022’s levels. Milk, broiler chickens and eggs would account for most of the $14. billion decline in livestock receipts.
Fertilizer expenses were expected to hold steady this year at elevated $42.2 billion, said the USDA. Livestock feed, the largest category of expenses, would dip by 5 percent to $72.7 billion. Overall, expenses would be a record $459.5 billion this year.
The USDA farm income forecast is available here.