The U.S. agricultural sector is headed for its third year in a row of exceptionally high net farm income, albeit a step down from the record set last year. Since 2021, net farm income — a broad measure of profits — has run at least $39 billion a year above the 10-year average.
“Farm sector income is forecast to fall in 2023 after reaching record highs in 2022,” said a USDA update. Net farm income was pegged at $141.3 billion this year, markedly lower than the record $183 billion last year, due to generally lower crop and livestock prices.
Strong global demand, plus the supply chain disruptions caused by Russia’s invasion of Ukraine, drove up commodity prices in 2022. The value of U.S. crop and livestock sales leaped by $100 billion, to a record $536.6 billion, according to USDA economist Carrie Litkowski. The cash receipts figure was expected to drop to $513.6 billion this year.
“2022 was a remarkable year,” said Joe Glauber, Senior Research Fellow at the IFPRI think tank, “so it’s not a surprise that income declined this year.”
Production expenses are up for the fifth year in a row, setting another record high at $458 billion, said USDA. Yet, farm sector equity will increase by nearly 8% this year; assets are growing in value much more rapidly than farmers accumulate debt. The debt-to-asset ratio, an often-used gauge of solvency, will decline for the second year in a row to 12.7%.
“Yeah, it’s a complicated story,” said Pat Westhoff, Director of the FAPRI think tank at the University of Missouri. “It’s equally true that the 2023 farm income figure is off sharply from 2022 and that it’s still a very high number by historical standards. Different people would want to emphasize one of those stories or the other.”
Net farm income of $140.1 billion in 2021, $183 billion in 2022 and $141.3 billion this year stand head and shoulders above the 10-year average of $101.3 billion annually. USDA will not estimate 2024 farm income until early February; it will update this year’s forecast on November 30.
EDITOR’S TAKE:
The reporting of this year’s net farm income is a classic case of “is the glass half-full or half-empty”. As this article aptly points out, the glass is definitely half-full. Despite a decline in 2023, net farm income will still be the third highest on record and well above the ten-year average. So, despite what the doomers and gloomers would like us to believe, farmers will be doing just fine, thank you! And, in spite of rising input costs earlier this year, prices for many key inputs, i.e., fertilizer are declining this fall. Plus, the value of farm assets is rising providing them with very solid balance sheets overall. The cherry on top is the lower debt-to-asset ratios seen by most farmers/ranchers. Thus, who are your best customer prospects – farmers/ranchers! What is the best way to reach these farmers/ranchers – AgTruckTrader.com! If you’re not on AgTT, you’re definitely missing out on this important market!
