Farm Economy Strong, Despite Projected Income Drop

After a record high income year in 2022, farmers this year will see profits declining. USDA is out with its new income forecasts. And here’s an example.

Net cash farm income is forecast to fall to about 149 billion. That’s about a 27% drop from 2022.

USDA economist Carrie Litkowski says that declines due to a number of factors first, farm prices for most commodities have softened and so…

…we expect cash receipts. Those are the sales of farm commodities to fall in 2023 after being a record high in 2022.

Cash receipts expected to come in about 4.3% lower than last year.

We’re also expecting that production expenses are the costs that farmers have to pay for their production inputs, is expected to continue to increase.

Last year expenses went up 15% Or about $56 billion. Carrie says for this year,

…they are forecast to increase another 7% or almost $30 billion. And finally government payments which are direct payments to farmers from farm programs are expected to fall.

They could fall by as much as 19%. So all three factors are pushing income down farmers this year also taking on a little more debt and paying higher interest rates. On that debt. But even with farm incomes projected down by well over 25% We’re still looking at a strong farm sector. That voice belongs to USDA Deputy Chief Economist Cindy Nickerson. She says first of course, last year was a huge record-breaking income year. It would be hard to top that anyway. But there are other measures of the solvency and health of the farm economy and in fact,

…farm sector solvency is forecast to improve and that despite forecast increases in debt.

And she says if you look at debt compared to the value of farm assets or the value of farm equity,

…debt to asset and debt to equity ratios are continuing to fall. And what that means is they’re improving.

Asset values are growing faster than debt. And as far as the farm bankruptcy rate, that is projected to stay very low, not much different from 2022.

Less than one farm bankruptcy per 10,000 farms.

So despite lower overall farm income this year, Cindy Nickerson says it’s not all doom and gloom. Not at all.