Farm net income could drop for the first time in five years; amount is still much higher than 10-year average

This year's farming net income decrease was expected.
(Photo by Gregory Hayes, Unsplash)

U.S. net farm income is expected to decrease for the first time in five years, but 2023 income is still above the country's 10-year average. "National net farm income will fall nearly 23% in 2023, coming down from a record high in 2022," reports Chris Clayton of Progressive Farmer. Net farm income, defined by Department of Agriculture as "a broad measure of profits," has risen each of the past five years, "but will come down $41.7 billion in 2023 to $141.3 billion in 2023. That's a 22.8% decline from 2022's record of $183 billion" but still higher than the 10-year average of about $101 billion.

The decrease in net income was expected. "Strong global demand plus the supply chain disruptions caused by Russia’s invasion of Ukraine drove up commodity prices in 2022," reports Chuck Abbott of Successful Farming. "The value of U.S. crop and livestock sales leaped by $100 billion, to a record $536.6 billion, said USDA economist Carrie Litkowski. The cash receipts figure was expected to drop to $513.6 billion this year." Joe Glauber, senior research fellow at the International Food Policy Research Institute, told Abbott, “2022 was a remarkable year, so it’s not a surprise that income declined this year.”

Production prices and farm equity values have increased alongside farm net income. "Production expenses are up for the fifth year in a row, setting another record high at $458 billion, said the USDA. Yet, farm sector equity would increase by nearly 8% this year; assets are growing in value much more rapidly than farmers accumulate debt," Abbott reports. "Farm groups have pointed to rising production costs as a reason for Congress to make it easier in the new farm bill to trigger crop subsidy payments and to expand the taxpayer-supported crop insurance programs. The budget watchdog Taxpayers for Common Sense called for retrenchment — the government will lose $16.3 billion on crop insurance this year, it said, despite high farm income."

Pat Westhoff, director of the Food & Agriculture Policy Research Institute, at the University of Missouri, told Abbott, "Yeah, it’s a complicated story. It’s equally true that the 2023 farm income figure is off sharply from 2022, and that it’s still a very high number by historical standards. Different people would want to emphasize one of those stories or the other.”

The USDA farm income forecast is available here.