The U.S. agricultural sector is headed for its third year in a row of exceptionally high net farm income, albeit a step down from the record set last year. Since 2021, net farm income — a broad measure of profits — has run at least $39 billion a year above the 10-year average.
“Farm sector income is forecast to fall in 2023 after reaching record highs in 2022,” said an Agriculture Department update. Net farm income was pegged at $141.3 billion this year, markedly lower than the record $183 billion last year due to generally lower crop and livestock prices.
Strong global demand plus the supply chain disruptions caused by Russia’s invasion of Ukraine drove up commodity prices in 2022. The value of U.S. crop and livestock sales leaped by $100 billion, to a record $536.6 billion, said USDA economist Carrie Litkowski. The cash receipts figure was expected to drop to $513.6 billion this year.
“2022 was a remarkable year,” said Joe Glauber, senior research fellow at the IFPRI think tank, “so it’s not a surprise that income declined this year.”
Production expenses are up for the fifth year in a row, setting another record high at $458 billion, said the USDA. Yet, farm sector equity would increase by nearly 8 percent this year; assets are growing in value much more rapidly than farmers accumulate debt. The debt-to-asset ratio, an often-used gauge of solvency, would decline for the second year in a row to 12.7 percent,
“Yeah, it’s a complicated story,” said Pat Westhoff, director of the FAPRI think tank at the University of Missouri. “It’s equally true that the 2023 farm income figure is off sharply from 2022 and that it’s still a very high number by historical standards. Different people would want to emphasize one of those stories or the other.”
Farm groups have pointed to rising production costs as a reason for Congress to make it easier in the new farm bill to trigger crop subsidy payments and to expand the taxpayer-supported crop insurance programs. The budget watchdog Taxpayers for Common Sense called for retrenchment — the government will lose $16.3 billion on crop insurance this year, it said, despite high farm income.
FAPRI said in March that farm income would decline this year and in 2024 before stabilizing at around $118 billion a year in the near to medium term. The think tank is expected to update its projections soon. The USDA will not estimate 2024 arm income until early February. It will update its income forecast for this year on Nov 30.
The USDA will not estimate 2024 farm income until early February; it will update this year’s forecast on Nov 30. FAPRI said in March net farm income would decline this year and in 2024 before stabilizing at around $118 billion a year in the near to medium term. The think tank is expected to update soon its projections.
Net farm income of $140.1 billion in 2021, $183 billion in 2022 and $141.3 billion this year stand head and shoulders above the 10-year average of $101.3 billion annually. Commodity prices strengthened at harvest time in 2020 with the return of China as the No. 1 buyer of U.S. food and ag exports. Global economic recovery from the pandemic also has bolstered prices
The USDA farm income forecast is available here.