Last week, USDA released its Farm Sector Income Forecast.
When adjusted for inflation, net farm income, a broad measure of farm profitability, is expected to decrease $48 billion (25.4%) in 2023 compared with 2022.
The forecast from USDA cites two factors contributing to the year-over-year decline:
- Lower government payments
- Higher production expenses
Compared to 2022, this year’s government payments in aggregate will be 19% lower. And production expenses (including operator dwelling expenses) will increase 6.9%.
“Aside from fertilizer, all your other input costs are probably either stable or increasing,” says Tony Jesina, VP of insurance, Farm Credit Services of America. “Cash rates haven’t come down yet seed prices rarely come down. Interest rates are up, family living expenses are probably not going to come down with what we see for inflation.”
According to USDA data, net farm income in 2023 will be 22.6% above its 20-year average (2003–22) of $115.2 billion, including adjustments for inflation.
Cash receipts from the sale of agricultural commodities are forecast to decrease by $23.0 billion (4.3 percent, in nominal terms) from a record high of $536.6 billion in 2022 to $513.6 billion in 2023.
As reported in the AgDay clip above, economists say the commodity reset is similar to 2013 in some ways, but there’s added volatility with black swan events making risk management more important.