Although net farm income, a broad gauge of profitability, would be down sharply from the record $182.8 billion of 2022, it would be far above the 10-year average of $101.5 billion.
U.S. net farm income will be a stronger-than-expected $151 billion this year, the second-highest total on record, according to USDA estimates. That’s roughly $10 billion higher than the August forecast and due chiefly to cost cutting by producers, aided by lower fertilizer, fuel, and feed prices.
Although production expenses this year will be the highest ever, farmers and ranchers are spending 3% — $14.6 billion — less than forecast in August. The reduction more than offset a mild decline in crop and livestock revenue, leaving more money in the bank and higher overall income.
This is the third year in a row of extraordinarily high farm income, a factor in the debate over the elements of the new Farm Bill. Ag groups say ever-rising expenses justify an increase in subsidies as a shelter against the inevitable hard times in a cyclical industry where commodity prices are currently declining. The Biden administration opposes a potential raid on climate mitigation funding to pay for higher subsidies.
In its new farm income forecast, the USDA said lower prices would trim farmer spending on fertilizer by 14 percent this year compared to 2022. Pesticides, fuel, and feed would also cost less. On the other hand, higher interest rates would cost producers an additional $10.3 billion this year. This reflects expectations that both total debt levels and interest rates will rise in 2023, according to the report.
Thanks to strong farmland prices, the value of farm real estate would increase 7.7% this year, outpacing the rise in debt. Land is 80% of farm assets. The debt-to-asset ratio, a commonly used measurement of the financial health of the farm sector, was forecast to fall to 12.73% this year, down from 12.93% in 2022 and the lowest ratio since 2016. Median farm household income was forecast at $99,802 this year, up 4.6% from last year.
EDITOR’S TAKE:
We can’t help ourselves – with news like this we just have to keep saying, “Farmers/ranchers have money and should be your top customer prospects!” Sure, the income is below 2022, but that was the record high year. Now 2023 is the second highest on record and caps off several record-breaking years in a row. It’s essential that you put your inventory on AgTruckTrader.com. And for those farmers/ranchers who express concern for increasing input costs, be sure to mention AgPack®, a program that could potentially save them up to $32,000 in operating cost. Oh, did we mention that soon we will have CADFI operational, which will offer farmers/ranchers competitive rates with terms matched to their cash flow. The rest is up to you!
