Crop prices are being pressured lower and lower and in return US farm income is forecast to take a sizable step backward. It doesn’t take a rocket scientist to figure out that one. In fact, US farm income in 2024 is forecast to tumble -25.5% versus last year, according to the USDA’s Economic Research Service (ERS). Adjusting for inflation, the projected income will be down over -27%, and nearly -2% below the 20-year average. While falling farm income has been the theme the last couple of years since hitting record highs in 2022, this year’s projected decline is the steepest since 2006.
The latest projections come from the “February 2024 Farm Income Forecast.” The data measured includes 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. Below are some of the key findings:
Net farm income (NFI), a broad measure of profits, is forecast at $116.1 billion in calendar year 2024, a decrease of -$39.8 billion (-25.5%) relative to 2023 in nominal (not adjusted for inflation) dollars. This follows a forecast decrease of -$29.7 billion (-16.0%) from 2022 to $155.9 billion in 2023. After adjusting for inflation, net farm income is forecast to decrease -$43.1 billion (-27.1%) in 2024 relative to 2023. With this expected decline, net farm income in 2024 would be -1.7% below its 20-year average (2003–22) of $118.2 billion and -40.9%t below the record high in 2022 in inflation-adjusted dollars.
Average net cash farm income (NCFI) for farm businesses is forecast to decrease -27.2 percent from 2023 to $72,000 per farm in 2024 (in nominal terms). All nine USDA, Economic Research Service (ERS) Farm Resource Regions are expected to see average net cash farm income fall in 2024 relative to 2023, with farm businesses located in the Northern Great Plains region expected to see the largest decline. When grouped by commodity specialization, all farm businesses specializations are likewise forecast to see lower average net cash income in 2024. Farms specializing in wheat are expected to see the largest percentage decline and those specializing in cotton expected to see the largest dollar decline relative to 2023.
Lower Commodity PricesLower commodity prices are a contributing factor in this year’s steep farm income decline. Overall, cash receipts from the sale of agricultural commodities are forecast to decrease by -$21.2 billion (-4.2%) from 2023 to $485.5 billion in 2024 in nominal dollars. Total crop receipts are forecast to decrease by -$16.7 billion (6.3 %) to $245.7 billion following lower receipts for corn and soybeans. Total animal/animal product receipts are projected to decrease by -$4.6 billion (-1.9%) to $239.8 billion in 2024, following declines in receipts for eggs, turkeys, cattle/calves, and milk.
- Combined receipts for corn and soybeans are forecast to fall -$17.2 billion. Corn receipts alone are expected to fall by -$11.3 billion (-14.3%), as lower forecasted prices should outweigh higher quantities sold in 2024. Lower prices in 2024 should also outweigh growth in quantities sold for soybean receipts, which are forecast to decrease by -$6.0 billion (-10.3%).
- Wheat receipts are forecast to decrease -$0.1 billion (-0.5%), as lower prices will outweigh higher quantities sold. Receipts for hay are projected to fall by -$0.8 billion (-8.3%) and sorghum receipts are projected to fall -$0.2 billion (-17.6%).
- Only a few commodities are expected to see receipt increases. Cotton receipts are projected to increase by +$0.1 billion (+1.6%) due to higher quantities sold while rice receipts are projected to grow by +$0.4 billion (+13.1%)
- While receipts for most major animal/animal products are projected to fall, receipts for hogs and broilers are expected to remain relatively unchanged. Cash receipts from cattle and calves are expected to decrease -$1.6 billion (-1.6%), as falling quantities sold should outpace growth in prices. Growth in quantities sold should slightly outweigh lower prices for hog receipts, resulting in an increase of +$0.3 billion (+1.0%) in nominal terms during the year, which represents a slight decrease in real terms.
- Broiler receipts are expected to increase +$0.7 billion (+1.6%) in 2024, due to higher prices and quantities sold. This nominal increase is a decrease in real terms. Falling prices should drive receipts for turkeys -$1.4 billion (-21.0 %) lower during the year. Cash receipts for chicken eggs are expected to decrease -$1.7 billion (-12.0%) in 2024, also due to a lower price forecast.
Lower Direct Government Farm PaymentsAlso contributing to the decline in 2024 farmer incomes is lower direct Government farm payments, which are forecast at $10.2 billion in 2024, a -$1.9 billion (-15.9%) decrease from 2023. Direct Government farm payments include Federal farm program payments paid directly to farmers and ranchers but exclude U.S. Department of Agriculture (USDA) loans and insurance indemnity payments made by the Federal Crop Insurance Corporation (FCIC). This decline is largely because of lower supplemental and ad hoc disaster assistance to farmers and ranchers in 2024 compared with 2023.
- Supplemental and ad hoc disaster assistance payments in 2024 are forecast at $5.9 billion, a decrease of $1.2 billion (17.4 percent) from 2023, mostly because of lower expected payments from the Emergency Relief Program. Since 2020, supplemental and ad hoc disaster assistance has represented the largest category of direct Government payments.
- Farm bill commodity payments under the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs are forecast to decline in aggregate. ARC payments are expected to be $39.1 million in 2024, a decrease of -$231.3 million (-85.5%) from $270.4 million in 2023. Despite the expected decrease in market prices, commodity prices are likely to remain above the levels needed to trigger significant ARC payments.
- PLC payments in 2024 are expected to be $40.8 million, an increase of +$32.9 million from $7.9 million in 2023. PLC payments are expected to increase in 2024 because of lower expected prices for rice (long-grain), seed cotton, and grain sorghum in 2024 compared with 2023.
Higher Production CostsAs has been the case in recent years, total production expenses are expected to continue moving the opposite direction of farm income. ERS forecasts total farm production expenses, including those associated with operator dwellings, at $455.1 billion in 2024. The expenses are forecast to have increased by +$9.8 billion (+2.3%) in 2023, compared with their 2022 level. The expenses are forecast to further increase by +$16.7 billion (+3.8%) in 2024. However, when adjusted for inflation, production expenses are forecast to have decreased by -1.3% from 2022 to 2023, and to increase by +1.6% from 2023 to 2024.
- Feed expenses, the largest single expense category, are forecast at $79.9 billion in 2023 and $80.6 billion in 2024, staying below the record-high 2022 level. In turn, labor expenses (including noncash employee compensation) are forecast to have risen by $2.2 billion (5.3 percent) in 2023, reaching $44.1 billion. Labor expenses are forecast to rise by additional $3.3 billion (7.4 percent) to $47.4 billion in 2024, compared with 2023. Livestock and poultry expense is projected to have grown by $6.5 billion (18.8 percent) to $41.1 billion in 2023. The increase is forecast to slow down in 2024, with expected growth of $3.3 billion (8.0 percent), to $44.4 billion.
- Interest expenses (including expense for operator dwellings) are forecast to have significantly increased in nominal terms in 2023, growing by $10.1 billion (41.8 percent above the 2022 value) to $34.2 billion. This reflects both higher total debt levels and interest rates in 2023. In 2024, interest expenses are expected to remain comparable with their 2023 levels, increasing in nominal terms but falling when adjusted for inflation.
- Fertilizer expenses (including lime and soil conditioner expenses) are projected to have significantly declined in nominal terms in 2023 from 2022, falling -$6.5 billion (-17.5%) to $30.4 billion, driven by reductions in fertilizer prices. In 2024, the fertilizer expenses are expected to grow by +4.3%from their 2023 levels yet remain below 2022 levels (in nominal terms).
- Fuel and oil expenses are forecast to have declined by -$2.2 billion (-11.7%) in 2023 and are expected to decline by an additional -$1.2 billion (-7.4 %) in 2024, driven by energy price declines.
