High commodity prices are predicted to propel U.S. net farm income to a record $160.5 billion this year, despite a steep climb in expenses, according to the U.S. Department of Agriculture. Farm income, a gauge of profitability, would be 14% higher than last year and twice as high as three years ago during the Sino-U.S. trade war.
With good times in the farm sector, the value of farm assets should climb 10% this year, following a 10% increase in 2021 — the number two year for farm income. Farm debt would climb more slowly, and the debt-to-asset ratio, a measure of financial health, would drop to 13.05%, its first decline since 2011.
Crops and livestock are expected to generate $541.5 billion in cash receipts, up 24%, or nearly $106 billion, from last year. Almost all of the increase, $96.8 billion, would be the result of higher prices. Corn, wheat, and soybean would fetch an additional $37 billion this year compared to last. Higher broiler chicken prices would boost receipts by 55%. Revenue from cattle, hogs, turkeys and milk also would climb. Cash receipts for chicken eggs are expected to more than double.
Commodity prices boomed with the return of China to the U.S. market in fall of 2020, and they surged again after the Russian invasion of Ukraine last February. The invasion disrupted grain and fertilizer exports from the Black Sea region. Ukraine and Russia are major wheat exporters, and Russia leads in fertilizer exports.
Farm production expenses are forecast to rise 18%, to a record $442 billion this year. This would represent the largest year-to-year dollar increase in nominal terms on record. Nearly every category of expense would go up. Fertilizer, lime, and soil conditioners would increase by 47%, fuel and oil by nearly 48%, interest costs by 41%, and livestock feed, the largest category, by 17%.
Farm groups have focused on the rise in expenses and have asked lawmakers, with a new farm bill to be written in 2023, for higher reference prices, a factor in calculating crop subsidies, and more protection through the government-subsidized crop insurance program.
EDITOR’S TAKE:
In case you weren’t already convinced that farmers/ranchers are prime customer prospects going forward, this report should do the trick. Record net farm income coupled with increased farm asset value is truly a winning combination. Despite record increases in related farm expenses, the overall impact is now predicted to be a record NET farm income.
Just as auto dealer outlook is at an all time low, as reported by Cox Automotive, and consumers are clearly cutting back on large purchases, and inventories are building, farmers/ranchers should be in the spotlight. You can reach them through our exclusive, targeted portal – AgTruckTrader.com. Post your inventory on AgTT, tell them about AgPack®, put all this in your local radio/TV and newspaper ads as well, and CAD will promote your dealership at the national level. We want to partner with your sales team so they can achieve even greater success!
