U.S. net farm income will be down substantially in 2023

By Sean Ellis

Idaho Farm Bureau Federation

POCATELLO – Total net farm income in the United States is expected to be down significantly in 2023, following a record year in 2022.

The latest farm sector income forecast by USDA’s Economic Research Service expects total net farm income in the U.S. during 2023 to fall by 17.4 percent, or $31.8 billion, to a total of $151.1 billion.

The U.S. set a total net farm income record of $182.8 billion in calendar year 2022, which was a 30.2 percent, or $42.4 billion, increase over 2021.

This year looks to be a different story, as declining farm-level commodity prices and rising production expenses bite into net farm income, which is a broad measure of profits and the farmer and rancher’s bottom line.

“2023 is going to be a tougher year for the agricultural industry,” said University of Idaho Agricultural Economist Brett Wilder. “For almost every ag industry, except for cattle and calves, it was a tighter year financially.”

These latest farm income forecasts are included in the “2023 Farm Sector Income Forecast” released Nov. 30 by USDA’s Economic Research Service.

The report forecasts U.S. farm cash receipts, which is what the farmer or rancher receives for their commodity, will total $509.6 billion in 2023. That would be a decrease of $25.2 billion, or 4.7 percent, compared with what was a record high in 2022.

Total crop cash receipts are expected to decline by 4.4 percent, or $12.1 billion, and total animal and animal product receipts are forecast to decline by 5 percent, or $13 billion.

Most of the decline in farm cash receipts “is due to low prices received by farmers for their commodity products relative to 2022,” USDA senior economist Carrie Litkowski said Nov. 30 while detailing highlights of the report.

The USDA forecast expects total farm and ranch production expenses to rise by 3.5 percent this year, or $14.9 billion. The largest increase in expenses is expected in interest payments (up 42.9 percent), and livestock and poultry purchases are forecast to be up 19.6 percent.

Total labor expenses for farmers and ranchers are forecast to rise by 3.9 percent.

Total spending on fertilizer is forecast to be down 14 percent in 2023, and fuels and oils and feed are also expected to decline in 2023 relative to 2022. Feed expenses are expected to decline by 2.5 percent from last year’s record total.

U.S. farmers and ranchers had record production expenses in 2022.

This year, they are expected to rise even further, at the same time that farm-level commodity prices are decreasing.

Coupled with lower cash receipts, “These higher expenses would lower income,” Litkowski said.

Adjusted for inflation, U.S. net farm income is expected to decline by 20 percent in 2023 relative to 2022.

Total direct federal government payments to farmers and ranchers are also expected to decline by 22 percent in 2023. Direct government payments are expected to total $12 billion in 2023.

Government payments to farmers and ranchers hit a record $45.6 billion in 2020 and most of those payments that year were related to pandemic-related assistance. They have decreased every year since.

A bit of good news contained in the report is that overall farm sector equity is expected to improve by 6.9 percent, $229.4 billion, in 2023 and farm bankruptcies are expected to decline.

Farm bankruptcy rates have trended down in recent years and reached less than 1 per 10,000 farms in 2022, Litkowski said.

They are forecast to fall even further in 2023 based on filings through September, she added.

The next USDA Farm Sector Income Forecast will be released Feb. 27 and will update the 2023 forecast and provide the first forecast for 2024.  

Total U.S. farm cash receipts for many of the main agricultural commodities produced in Idaho are expected to fall in 2023 compared with 2022.

Milk receipts in the U.S. are forecast to decrease by 18.3 percent, or $10.5 billion. Dairy is Idaho’s main ag commodity in terms of farm cash receipts and the state’s 360 dairies brought in about $4.2 billion in farm receipts in 2022.

However, U.S. farm cash receipts for cattle and calves, Idaho’s No. 2 ag commodity, are expected to rise by 16.6 percent, or $14.3 billion.

Wheat receipts nationwide are forecast to decrease by 1.3 percent and corn receipts are expected to decline by 10.6 percent.

Cash receipts for vegetables and melons, a category that includes potatoes, are expected to decline by 2.4 percent in 2023. However, that estimate includes a projected increase of $600 million in potato receipts in 2023. Potatoes are Idaho’s No. 3 ag commodity in terms of total cash receipts.

Cash receipts nationwide for hay, Idaho’s No. 4 ag commodity, are forecast to increase by 8.6 percent, or $900 million.