FAPRI: Lower net farm income in the forecast
Net farm income is expected to dip slightly in the next two years but an ag economist says the outlook is still positive for U.S. agriculture.
A new report from the Food and Ag Policy Research Institute at the University of Missouri says net farm income is projected at $143 billion in 2023, a sharp decline from last year.
Pat Westhoff with FAPRI says last year’s strong farm income was unusual and farmers shouldn’t expect the level of prices or income to continue. Looking forward, Westhoff says…
“We still have income levels higher than they were in the years prior the pandemic, but there’s a lot of risks right now. If we were to see a sharper drop in commodity prices or if the cost of production were to rise more than we’re expecting, those things could squeeze margins more than they are currently.”
Westhoff says the decline in net farm income for 2023 comes from several factors including lower prices for many commodities.
“There’s lower prices for corn, soybeans, wheat and cotton compared to one year ago. We’re expecting lower prices for chickens, hogs and milk as well.”
Cattle prices are the exception to lower commodity prices. Westhoff says the drought is causing higher prices for fed and feeder cattle.
“Ranchers have fewer cattle than they would otherwise and fewer cattle are having calves that would end up in feedlots and eventually, on your dinner plate.”
But Westhoff says those higher cattle prices are offset by higher feed costs, including forage. In general, there’s also a 5% increase in farm expenses this year and a decline in government payments.
“With the high commodity prices, the Ag Risk Coverage and Price Loss Coverage Programs are making small or no payments this year and there’s less ad-hoc this year than there was in 2020.”
FAPRI says the farm income decline in 2024 will be caused by further reductions in crop prices and total farm expenses are expected to decline. Westoff says net farm income is expected to remain stable through 2027.