The U.S. Department of Agriculture (USDA) is forecasting net farm income will drop sharply this year on lower revenue from crops and livestock while input costs remain high.

The report estimates farm income to fall 15.9% from last year, while costs are expected to increase more than 4%, on top of a record increase in production expenses last year.

The total $136.9 billion estimate for 2023, however, will still be 26.6% above the 20-year average for farm earnings when adjusted for inflation.

Increased operating costs, lower prices for livestock and crops and the end of pandemic-related assistance are among the factors that will contribute to a loss in farm income.

While fuel and fertilizer costs are expected to decline somewhat from record highs, marketing, storage and transportation costs are forecast to increase 11%. Labor costs are also projected to increase 7%.

“The farm income forecast is a stark reminder that America’s farmers and ranchers are not reaping big benefits from higher prices at the grocery store,” American Farm Bureau Federation President Zippy Duvall said. “Although some commodity prices are rising, farmers are being hit by circumstances beyond their control, from the cost of supplies and labor to drought and avian influenza. That’s why the farm bill is so important and must be passed this year. Farm bill programs enable farmers to manage the risk and weather the storm of challenges to continue stocking the pantries of America’s families.”

Other challenges facing farmers and ranchers are rising interest rates, and farm sector debt is projected to increase $31.9 billion to a record $535 billion.

“Nearly 70% of farm debt is in the form of real estate debt, for the land to grow crops and raise livestock. Real estate debt is projected to increase $26.79 billion to a record-high $375.8 billion, largely due to an increase in land values across the country,” according to a recent Market Intel report published by AFBF. “Non-real estate debt—or debt for purchases of things like equipment, machinery, feed and livestock—is projected to increase by $4.4 billion to a record $159.1 billion.”

Read the full Market Intel here.