After two strong years of growth, U.S. farm income is forecast to drop substantially in 2023 as commodity prices fall and expenses rise, the U.S. Department of Agriculture Economic Research Service reported Tuesday.
And with food prices projected to rise into 2023, the nation’s producers will not be reaping the financial benefits.
The economic team said inflation-adjusted net cash profits are expected to decline from a record-high $195.3 billion last year to $150.3 billion in calendar year 2023, a drop of 22.9%.
Projected net farm income will fall to $136.9 billion, according to the ERS, 18.2% below the calendar year 2022 levels when adjusted for inflation. 2022 marked the best year on record for inflation-adjusted net farm income since 1973.
The division added that declines in farm income are expected to affect nearly all specialty operations and regions across the country.
The farm sector income and wealth forecast was the first of 2023. ERS senior economist Carrie Litkowski also spoke on a webinar about what the details of the forecast hold for farmers and legislators.
“The goal of forecasting is not to predict the future, but to tell you what you need to know to take meaningful action in the present,” Litkowski said.
She said that USDA data on farm income and wealth can contribute to discussions in Congress this year on the upcoming farm bill.
The U.S. farm sector comprises roughly 2 million farms, which operate close to 900 million acres of land.
Broader farm income Litkowski said that the drop in net farm cash income and net farm income levels can be largely attributed to lower commodity prices. She noted the ERS forecast a 4% reduction in commodity cash receipts from calendar years 2022 to 2023, equal to $23.6 billion.
Litkowski added that total crop cash receipts are expected to decline close to 6% from 2022, with corn and soy most affected. Still, Litkowski said cash receipts for both crops will remain at relatively high levels.
The economist also cited the impacts of a $5.4 billion reduction in direct government payments to farmers in 2023, to $10.8 billion. This number reflects a forecast 34.4% drop in federal spending, which Litkowski attributed to declining payouts for USDA pandemic aid and disaster assistance programs.
Litkowski also attributed net farm income declines to growing production costs, forecast to increase by an inflation-adjusted $18.3 billion from 2022. Litkowski said these cost increases are driven predominantly by growth in interest rates, livestock and poultry expenses, and labor expenses.
The economists also cited growing operator dwelling expenses as affecting production costs for farmers, including factors like property taxes.
Farm businesses Litkowski noted that all farm businesses in the report, regardless of location or crop specialty, are forecast to see declines in cash receipts and government payments along with increasing costs.
The ERS noted that average net cash farm income for farm businesses is expected to fall 17.7% in nominal terms, to $92,400. A nominal dollar measure is an amount of money that has not had its value adjusted for the effects of inflation.
The economists added that all commodity specializations of farm businesses are forecast to receive lower average cash net income.
Source:https://dailyyonder.com/usda-projects-farm-income-will-fall-in-2023-after-two-robust-years/2023/03/01
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