US farm income likely to fall in 2023 after record highs

US farm incomes this year are expected to fall for the first time since 2019 amid higher production expenses, a drop in direct government payments and as cash prices for commodity crops and livestock ease back from historic highs, according to a report from the US Department of Agriculture (USDA) on Tuesday.

Net farm income – which is a broad measure of profits in the agricultural economy, according to the agency – is forecast to reach $136.9 billion in 2023 in nominal dollars, down nearly 16% from a year earlier.

The agency said the drop follows 2022 net farm income hitting a high of $162.7 billion, in nominal dollars, and $140.9 billion in 2021.

When adjusted for inflation, net farm income is forecast to fall $30.5 billion, or 18.2%, in 2023 compared with a year earlier.

As farm incomes fall and expenses rise, economists say, that squeeze may make producers more cautious to try expanding their crop production operations, or to spend more on machinery or land, at a time of low global grain supplies.

Much of the income pressure in the crop sector came from lower prices of commodities sold – particularly corn and soybeans – and that drop in prices offset higher quantities sold, the agency said.

The USDA also noted declines in prices farmers received for sales of dairy, hogs, broilers and chicken eggs. Cattle cash receipts are forecast to remain relatively stable in 2023.

Still, the USDA noted, this year’s net farm income is expected to be nearly 27% above its 20-year average, in inflation-adjusted dollars.

In nominal dollars, production costs overall are expected to increase 4.1%, USDA said. Interest expenses on operating and real estate debt, and livestock and poultry purchased, are expected to see the largest dollar increases.

Certain expenses, including fertilizer, fuel and feed for livestock, are expected to ease, the agency reported.

While farm sector debt is forecast to continue to increase, so is farm equity, mostly due to rising land and equipment values, said USDA Economic Research Service economist Carrie Litkowski.

Tags: forecast, Broilers, farm, incomes, chicken eggs, USDA, prices, US, Production, hogs, Dairy