Following a record-high year, farm profits for 2023 are expected to be lower than what USDA originally predicted, thanks to rising production costs and less government aid.
Net farm income is forecast to decrease about 23% ($41.7 billion) compared to 2022. Last year, net farm income reached a record high of $183 billion. After adjusting for inflation, the decrease in net farm income from 2022 to 2023 will look closer to 25% ($48 billion).
Net cash farm income is expected to decrease about 26.5% percent ($53.6 billion) relative to 2022. When adjusting for inflation, this number drops an additional 2.5% to about 29% ($60.5 billion).
However, USDA noted, “Despite the decrease, net cash farm income in 2023 would be 7.8 percent above its 2003-22 average of $137.8 billion.”
For the livestock sector, total animal and animal product cash receipts are expected to decrease about 5%, or $11.9 billion. While total receipts are expected to decline, cattle and calves receipts are actually expected to increase about 18% ($15.3 billion) during the year. This is a result of lower numbers and growing prices. Milk, broiler, egg and hog receipts are all forecast to decline.
Cash receipts from selling ag commodities are expected to decrease about 4% ($23 billion) from the 2022 record-high number of $536.6 billion. Total crop receipts are forecast to drop 4% ($11.2 billion) as a result of lower receipts for corn and soybeans
Farm businesses are expected to see a decrease of about 18% for average net cash farm income, bringing the average income to $87,300 per farm. Grouping by commodity specialization, all farm business specializations except cattle and calves will see lower average net cash income in 2023.
“Cattle/calves specialized businesses are forecast to see average net cash farm income increase 36.3 percent,” USDA said. “Farms specializing in dairy are expected to see the largest decline relative to 2022.”
Farm sector equity is expected to increase by nearly 7% to reach $3.57 trillion. Farm sector assets are forecast to increase 6.6% to $4.09 trillion following expected increases in the value of farm real estate assets.
Farm sector debt is also expected to increase nearly 5% to $520.1 billion. Debt-to-asset levels are predicted to improve slightly from 2022, from 12.93% to 12.72%. USDA forecasts working capital will fall 5.5% compared to 2022.
Factors for decreases
Increasing production costs, along with less direct government aid, are two of the major factors contributing to lower forecast income.
Total production expenses are expected to increase nearly 7% ($29.5 billion) from 2022, with interest expenses and livestock purchases expected to see the largest increases. Fuels/oils expenses are expected to remain relatively stable to 2022.
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Direct government payments are forecast to fall 19% ($2.9 billion) from 2022. Government payments include federal farm program payments, but do not include USDA loans and insurance indemnity payments. The decline follows less supplemental and ad hoc assistance to producers.
American Farm Bureau Federation (AFBF) recommends producers who don’t currently have risk management options in place to take advantage of available options.
“For those who don’t currently have risk management options in place because maybe there aren’t crop insurance programs for that crop or they don’t really fit your operation type, this is time to engage with your Farm Bureau and your elected officials,” said Danny Munch, AFBF economist, in a “Newsline” podcast episode. “We’re in the middle of farm bill conversations. We want to make sure that the farm bill gets passed, and that it’s comprehensive, and that there’s ways for farmers to hedge against revenue declines like this.” — Anna Miller, WLJ managing editor
