The Agriculture Department has sharply raised its forecast for farm earnings this year, projecting that net farm income will fall by close to 7% from 2023, a far smaller decline than USDA economists had estimated in February.
The new forecast reflects wide variations in earnings by sector. Stronger than previously estimated profits in the cattle, dairy and egg sectors are expected to partially offset price declines that are hammering many row crop producers this year, according to the latest farm income outlook from USDA’s Economic Research Service, released Thursday.
Net farm income for 2024 is now estimated at $140 billion, a decrease of $10.2 billion, or 6.8%, from 2023 when adjusted for inflation. Despite the drop, net farm income would still be 15.2% above the 20-year average, ERS says.
Net cash farm income, which more closely tracks farmers’ cash flow, is forecast at $154.2 billion. When adjusted for inflation, that would be a decline of 9.6%, or $16.3 billion, from 2023 and 6.2% above the 20-year average.
Net cash farm income is based on cash receipts from farming, plus government payments and other farm-related income, minus cash expenses. Net farm income also factors in depreciation and changes in inventory values.
USDA’s February forecast had projected net farm income at $116.1 million this year, or 1.7% below the 20-year average when adjusted for inflation. Net cash farm income was projected to decline 25.8%, or $42.2 billion, in 2024.
The latest forecast doesn’t provide an explanation of the differences between the two forecasts.
ERS economist Carrie Litkowski said the two largest factors in the net income revisions from February were increases in projected animal and animal product receipts, based on market prices, and a reduction in estimated production expenses. In February, USDA economists thought production expenses would actually be higher this year. Instead, they've dropped.
USDA still estimates commodity cash receipts will decline by $9.8 billion this year, but the February forecast projected they would drop by $21 billion. Total receipts from crops are still expected to drop by $27.7 billion, or 10%, led by falling prices for corn and soybeans, but sales of livestock and livestock products are expected to increase by $17.8 billion, or 7.1%, “following increases in receipts for eggs, cattle/calves, milk, and broilers,” ERS says.
The February forecast estimated animal and animal product receipts would drop $4.6 billion.
Sales from corn and soybeans are expected to fall about 21.9% and 16.7% respectively in the latest forecast, while receipts from wheat and cotton are projected down 14.5% and 25.5% respectively in USDA's latest forecast. Sales of fruits and nuts are projected down 4.3% while receipts from vegetables and melons are expected to be 7% higher.
Direct government payments are expected to be $1.8 billion, or 15.1%, lower this year because farmers are getting less disaster assistance and payments through the Dairy Margin Coverage program.
Total production costs this year are expected to fall by $4.4 billion, or 1%, with the largest declines in feed, fertilizer and pesticide expenses.
While labor costs are expected to be 6.9% higher this year, farmers are expected to spend 9.7% less on fertilizer, 10.4% less on pesticides and 12.3% less on feed.
Average net cash farm income for farm operations is forecast to fall 8.9% to $106,200 in 2024. But farm sector debt and equity are both expected to increase this year by 4.2% and 5.3% respectively.
The revised forecast comes as farm groups are pushing Congress to pass a new farm bill and Republicans are using the downturn in commodity markets the growing agricultural trade deficit to criticize the Biden-Harris administration’s stewardship of the farm economy.
In a statement, Agriculture Secretary Tom Vilsack noted that “2024 iis expected to close out a four-year streak of net farm income that’s above the 20-year average. For the prior four years, net farm income was consistently at or below that historic average, even before the COVID-19 pandemic.
“Without question, despite a softening of input costs, returns to crop producers remain a challenge as we recover from shocks in the market, such as Russia’s war in Ukraine. However, in other areas the report improves the difficult picture the last forecast painted in February: This forecast projects that income for livestock producers will rise, and farmers will continue to see declining production expenses led by feed, fuel and fertilizer helping to offset lower commodity prices."
But Zippy Duvall, president of the American Farm Bureau Federation, said in an interview that producers still need a new farm bill despite the better numbers in the latest forecast, which he described as “very troubling” since it shows net farm income 27.6% below the 2022 record.
“We need a farm bill now and not later. We’ve been kicking the can down the road,” Duvall said. “We’re not seeing more action on the House side, and we see nothing happening on the Senate side, which tells me the Senate side doesn’t care about rural America.”
The House Ag Committee approved a farm bill in May, but it hasn’t been put on the floor yet, and the Congressional Budget Office says it has a $33 billion funding shortfall. Senate Ag Chairwoman Debbie Stabenow, D-Mich., has taken no action on a bill in her committee.
Sen. Chuck Grassley, R-Iowa, said earlier this week that he expected another one-year extension of the 2018 farm bill to be attached to a continuing resolution that’s needed to keep the government funded after the new fiscal year starts Oct. 1.
