By Julie Tomascik
Editor
Net farm income is forecast to continue falling, according to the U.S. Department of Agriculture’s (USDA) most recent Farm Sector Income Forecast.
The report shows net farm income expectations at $141.3 billion, a substantial drop from last year’s record high of $183 billion.
When adjusted for inflation, USDA’s Economic Research Service projects net farm income—a broad measure of farm profitability—to decline about 25.4% in 2023 relative to 2022’s income.
The drop in net farm income comes amid higher production costs, falling commodity prices and a decline in direct payments from the government.
“USDA’s most recent estimates for 2023 net farm income provide an updated estimate of the farm financial picture,” American Farm Bureau Federation economists said in a Market Intel report. “Much of the forecasted decline in 2023 net farm income is tied to lower crop and livestock cash receipts, continued increases in production costs and a decrease in ad hoc government support.”
Nearly all sectors of the farm economy are projected to decrease.
Cash receipts from sales of all agricultural commodities are forecast to decrease by $23 billion from a record high of $536.6 billion in 2022 to $513.6 billion in 2023.
The agency noted returns from milk, broilers, eggs and hogs are driving the overall decline for animal product receipts.
“The largest decrease in net farm income is tied to a projected fall on cash receipts for livestock, mainly due to lower prices for all commodities except for turkey and cattle. The value of livestock production is expected to decrease about 5%, which is about $12 billion,” Danny Munch, AFBF economist, said. “On the crop side, it’s a similar story. They expect crop sales to be down 10% for corn to $8.4 billion, soybeans to be down 8.6% to $5.4 billion.”
Net cash farm incomes are expected to also decrease, with dairies experiencing the largest drops, while beef cattle operations are expected to see net cash farm income increase by 36.3%.
As commodity revenues drop, production expenses are forecast to increase, according to USDA’s report.
Feed costs are up 3%, and labor costs are up 5%. The agency also anticipates marketing costs to increase 5%.
The report noted direct government payments are expected to drop $3 billion, or 19%, to $12.6 billion. This marks the third consecutive decrease in government payments for farmers since the peak of the COVID-19 pandemic in 2020 but is higher than the $10.2 billion in payments forecasted in February.
The report showed interest expenses, or the cost of capital, are nearly 40% above last year. Munch said farmers and ranchers should plan now for how to weather these lower revenues.
“Take advantage of risk management options available to you. This can include things offered through the federal crop insurance program available for lots of crops, as well as any of the farm bill commodity programs like Dairy Margin Coverage. For those who don’t currently have risk management options in place because maybe there aren’t crop insurance programs for that crop or they don’t really fit your operation type, this is time to engage with your Farm Bureau and your elected officials,” he said. “We’re in the middle of farm bill conversations. We want to make sure that the farm bill gets passed, and that it’s comprehensive, and that there’s ways for farmers to hedge against revenue declines like this, regardless of what type of crops that they grow.”
The August report was one of three farm income reports released by USDA. The first was released in February, and the final report will be released in November.
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