After back-to-back years of robust growth, US farm profits are expected to drop substantially in 2023. Net farm income, a broad measure of profits, is forecast to decline nearly -16% from last year, while net cash income is expected to decrease more than -20%. While the declines are no doubt steep, the 2023 forecasts for both measures do remain above 2020 levels as well as their 20-year averages.
The latest projections come from the USDA’s Economic Research Service’s “February 2023 Farm Income Forecast.” The data measures include the farm sector’s receipts and expenses; gross and net value added; and both net cash farm income and net farm income. Measures also include changes to various other financial considerations such as debt, assets, overall wealth, etc. Taken together, the measures summarize the financial condition of the farm sector. The full series covers a vast amount of data that can be found HERE. Below are some of the highlights.
- Net farm income (NFI), a broad measure of profits, is forecast to decline -$25.9 billion (-15.9%) in calendar year 2023 to $136.9. That compares to $167.3 billion in 2022, the highest NFI level since 1973 after adjusting for inflation. When adjusting the NFI forecast for inflation, the 2023 decline pencils even steeper with a decrease of -$30.5 billion, or -18.2% in 2023 relative to 2022. Despite this expected decline, net farm income in 2023 would be +26.6% above its 20-year average (2002–2021) of $108.1 billion in inflation-adjusted dollars.
- Similar to the decline in net farm income (NFI), net cash farm income (NCFI) is forecast to fall by -$39.4 billion (-20.7%) from 2022 to $150.6 billion in 2023. That follows an annual increase of +$32.7 billion (+28.0%) in 2021 and a forecast increase of +$40.4 billion (+27.0%) in 2022. In inflation-adjusted dollars, NCFI income is forecast to decrease by -$44.7 billion (-22.9%) compared with the previous year.
- Overall, farm cash receipts are forecast to decrease by -$23.6 billion (-4.3%) from 2022 to $519.9 billion in 2023 in nominal dollars. Underpinning these forecasts, crop receipts are forecast to decrease by -$8.9 billion (-3.1%) from 2022 levels to $276.9 billion.
- Corn receipts are forecast to fall by -$4.1 billion (-4.5%), as higher quantities sold are not expected to offset lower expected prices. Soybean receipts are expected to decline -$5.2 billion (-8.1%), mainly due to lower forecasted prices. In contrast, wheat receipts are forecast to grow by +6.1%, or +$600 million, mainly due to growth in quantities sold.
- Total animal/animal product cash receipts are expected to decrease -$14.7 billion (-5.7% in nominal terms) to $243.0 billion in 2023. Milk receipts are expected to decrease -$8.4 billion (-14.6%) in 2023, due to falling prices. Hog receipts are forecast to decline by -$800 million (-2.7%), as flagging prices should outweigh higher quantities sold. Conversely, higher prices are forecast to lead receipts for cattle and calves higher by +$2.1 billion (+2.4%) during the year, despite lower quantities sold.
- Broiler receipts are expected to fall -$3.6 billion (-7.4%) in 2023, as falling prices should outweigh a positive quantity effect. Similarly, a large drop in prices should outweigh higher quantities sold for chicken egg receipts, which are forecast to fall -$4.9 billion (-24.0%). Receipts for turkeys are forecast to increase +$0.7 billion (+10.6%), behind expectations for higher prices and quantities sold.
- Direct Government farm payment reductions are another big factor in declining farm income. USDA projects a -$5.4 billion reduction in direct government payments to farmers in 2023, to $10.2 billion. This number reflects a forecast -34.4% drop in federal spending, which is attributed to declining payouts for USDA pandemic aid and disaster assistance programs.
- Farm sector production expenses—including expenses associated with operator dwellings—will be another contributor to lower farm profits. In calendar year 2023, production expenses are forecast to increase by +$18.2 billion (+4.1%) from 2022 to reach $459.5 billion in calendar year 2023. When adjusted for inflation, production expenses are forecast to increase by +1.3% from 2022 to 2023, remaining below the record-high level of 2014. Most of the production expense categories are projected to remain above their 2021 levels in 2023, in both nominal and inflation-adjusted dollars.
- Feed expenses, the largest single expense category, are forecast at $72.7 billion in 2023, falling -$3.9 billion (-5.1%) from 2022. This reduction, however, follows a projected +$11.3 billion (+17.4%) increase in 2022. When adjusted for inflation, both 2022 and 2023 feed expense levels remain high but below the peaks of 2012–14.
- Fertilizer-lime-soil conditioner expenses, the second largest category, are forecast to have reached a record high in 2022 at $42.5 billion. They are expected to remain high at $42.2 billion in 2023, decreasing by -$0.3 billion (-0.8%) as compared with 2022.
- Interest expenses (including operator dwellings) are forecast to rise by +$6.2 billion (+22.4%) to $33.8 billion in 2023 following a projected increase of +$8.2 billion (+42.1%) in 2022. This reflects expectations that debt levels for the sector and interest rates will continue to grow in 2023, although at a slower rate than in 2022.
- Livestock and poultry expenses are forecast to rise by +$4.8 billion (+13.6%) to $40.2 billion. This increase is comparable to that experienced in 2022, when livestock and poultry expenses grew by +$4.7 billion (+15.4%), without adjusting for inflation.
- Labor expenses (including noncash employee compensations) are forecast to rise by +$2.9 billion (+7.3%), reaching $42.5 billion. When adjusted for inflation, labor expenses are expected to grow by +4.4%, after being staggered in 2022.
- Fuel and oil expenses are projected to fall by -$3.0 billion (-14.9%) to $17.1 billion in 2023. The 2023 forecast is driven in part by the U.S. Energy Information Agency’s forecast of lower diesel prices (by -80 cents per gallon, on average) in 2023. When adjusted for inflation, the 2023 level of fuel and oil expenses is forecast to match the 20-year average.
- Net rent is forecast to fall by -$1.6 billion, or -8.2%, to $18.2 billion in 2023. If realized, this decline would be the first reduction in net rent since 2018 and, in part, reflects the forecast decline in net income.
