FAPRI Baseline Update- U.S. Farm Income and Government Costs in Focus

High commodity prices led to record levels of net farm income in 2022, despite a large increase in production expenses. In 2023 and 2024, lower prices for many commodities contribute to projected declines in net farm income. However, farm income remains high by historical standards, even after correcting for inflation.

“This report utilizes commodity supply, demand and price projections from the FAPRI-MU August 2023 baseline update. Historical data are from USDA and include the revision to farm income accounts released by the Economic Research Service (ERS) on August 31, 2023. ERS reduced its previous estimates of 2022 farm expenses and raised its estimates of farm receipts, resulting in the revised estimate that net farm income reached a record $183 billion in 2022.”

More narrowly, the baseline pointed out that, “Projected net farm income in 2023 is $143 billion, a sharp reduction from the 2022 record but slightly above the 2021 level in nominal terms. After correcting for inflation, real net farm income in 2023 is below the 2021 level, but above the levels of every year between 2014 and 2020.

“Crop and livestock receipts both decline in 2023 because of lower prices for a range of agricultural commodities. An important exception is cattle, where drought has resulted in reduced inventories and sharply higher prices for fed and feeder cattle.”

The FAPRI update also noted that, “After increasing 15% in 2022, farm production expenses increase by 5% in 2023. Higher interest expenses and higher costs for purchased livestock account for most of the increase in 2023 expenses.”

“Government payments decline again in 2023 and are less than a third of what they were in the record year of 2020,” the update said.

Monday’s update pointed out that, “The projected decline in net farm income is smaller in 2023 than the expected drop in net cash income. The latter is a cash flow measure, which considers current receipts and expenses, but excludes depreciation and changes in the value of inventories.”

The FAPRI update added that, “Higher land values contribute to a 6% increase in farm asset values in 2023. Slower projected growth in land values results in relatively flat projected farm asset values for the next several years.

“Farm debt increases at a modest pace, resulting in a slight uptick in the farm debt-to-asset ratio, from 12.9% in 2022 to 13.7% in 2028.”