USDA Projects Net Cash Farm Income Will Decline in 2023

Even with the rise in fertilizer and fuel prices, net farm income hit a record in 2022. Now, USDA ERS says 2023 could be a different story, forecasting net farm income to fall nearly 16% this year. 

USDA’s first official net farm income forecast of the year shows higher costs will drive down 2023 net farm income, but the bigger factor is the forecast for a decline in commodity prices. If commodity prices can at least hold where prices sit today, the picture won’t turn bleak, at least for this year, but it’s still a changing scenario from 2023. 

Initial Forecast Points to Expected Drop in Cash Receipts, Government Payments

Farm Journal Washington correspondent Jim Wiesemeyer says his biggest takeaway form the initial net farm income forecast is both net cash and net farm income forecasts are lower for this year, with an expected drop in cash receipts, government payments, but an increase in expenses. 

“Working capital is also falling as farmers have eaten into their cash reserves, much like consumers have burned through their savings, but to a lesser degree in agriculture,” says Wiesemeyer. “But working capital at $118.45 billion is still nearly double the recent low of $65 billion in 2016. Financial health remains solid even as debt-to-asset and debt-to-equity ratios are both expected to rise in 2023 versus 2022.”

ERS forecasts cash receipts from the sale of agricultural commodities to drop $23.6 billion, or 4.3%. That’s after a record high forecast for last year of $543.4 billion. USDA says those specializing in dairy and hogs are expected to see the largest decline relative to 2022. The breakdown of cash receipts broken down by commodity includes:
• Total crop receipts are expected to decrease by $8.9 billion (3.1%) from the forecast 2022 level.
• The drop is led by lower receipts for soybeans and corn.
• Total animal/animal product receipts are expected to decrease by $14.7 billion (5.7%).
• The decline in livestock is driven by lower receipts for milk, eggs, broilers and hogs.

A Lot Can Still Change for Net Farm Income

While the initial forecast shows a drop in net farm income, Westhoff points out much can change in a year’s time. 
“Weather always matters, as does the health of the general economy,” says Westhoff. “And, as we’ve learned the last few years, there will be wildcards, think China trade war, COVID and the Russian invasion of Ukraine.”