After seeing record profitability in 2022, the U.S. farm sector is in a downturn for an indefinite period, said a band of agricultural economists on Monday. Congress could feel pressure to provide a bailout to buffer the decline in income, at the same time producers try to pare their costs, they said at a conference sponsored by the Agricultural Business Council of Kansas City.
“We’ve entered a downturn in the farm economy, there’s no doubt about it,” said John Newton, head of the market forecasting company Terrain. “That’s why people want to see a farm bill get over the finish line, we can update those risk management tools…that’s also why you’re hearing calls for, ‘we need some ad hoc support.'”
USDA chief economist Seth Meyer said agriculture was “most definitely in a cost/price squeeze” and Kanlaya Barr, director of corporate economics for Deere and Co., referred to “this downturn in agriculture” during her opening remarks.
Early this month, the USDA estimated net farm income, a measure of profitability, would be a stronger-than-expected $140 billion, the fourth-highest ever, but far below the peak of $182 billion in 2022. Production expenses are down for the first time since 2018, it said. Crop revenue was forecast down by 10 percent, led by corn and soybeans, while livestock receipts would rise by 7.1 percent.
When moderator Sara Wyant asked how long the downturn would last, Meyer replied, “I have no idea how long this lasts.” Periods of tight margins are more common than the recent boom times, he said.
Counting this year, the four highest years of net farm income have occurred since 2020. Farmers received tens of billions of dollars in trade war and pandemic relief payments beginning in 2019.
Farmers have a variety of areas for trimming input costs that include equipment, seed, fertilizer, pesticides, and land rental, said Barr. Rental rates are probably the “stickiest” of expenses and it may be 20i26 before land costs come down, she said.
Kansas Sen. Jerry Moran said additional support to crop growers might be included in an extension of current farm law or be tucked into a must-pass bill yet this year. The senior Democrat on the House Agriculture Committee said last week that some farmers have suggested “doing a two-year ad hoc package that would bolster the safety net for 2024 and 2025 crop years.”
A University of Missouri think tank said on Monday it expects net farm income to average roughly $140 billion a year through 2029.