US farm incomes are set to fall in 2023 after hitting record highs

By PJ Huffstutter

CHICAGO (Reuters) – U.S. farm incomes are expected to fall this year for the first time since 2019 as production costs rise, direct government payments fall and cash prices for commodities and livestock fall from historic highs, according to the U.S. Department of Das reported the agriculture on Tuesday.

Farm net income — which the agency says is a broad measure of profits in the agricultural economy — is projected to reach $136.9 billion in nominal dollars in 2023, down nearly 16% from a year earlier.

The agency said the decline follows net farm income in 2022, which peaked at $162.7 billion in nominal dollars and $140.9 billion in 2021.

Adjusted for inflation, net farm income in 2023 is expected to fall by $30.5 billion, or 18.2% year-on-year.

As farm incomes fall and spending rises, economists say, this bottleneck could make producers more cautious as they seek to expand crop production or 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 price drop offset higher volumes sold, the agency said.

The USDA also noted price drops farmers received for selling dairy, hogs, broilers, and chicken eggs. Cattle cash earnings are projected to remain relatively stable in 2023.

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

In nominal dollars, total production costs are expected to rise 4.1%, the USDA said. Interest expense on commercial and real estate debt and on livestock and poultry purchases is expected to see the largest dollar gains.

Certain spending, including fertilizer, fuel and animal feed, are expected to ease, the agency reported.

While agricultural sector debt is expected to continue rising, farm equity is also rising, largely due to rising land and equipment values, USDA Economic Research Service economist Carrie Litkowski said.

(Reporting by PJ Huffstutter in Chicago; Editing by Jonathan Oatis)

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