Big drop in farm income forecast as pandemic aid ends
After reaching its highest level since 2013, U.S. net farm income would tumble by one-fifth next year, despite continued high crop and livestock revenue, said the Food and Agricultural Policy Research Institute on Tuesday. “Under current policies, farm income could drop again in 2022, as government payments decline and production expenses continue to rise,” the think tank said.
Direct government payments to farmers would total $6.3 billion in the new year, compared with $28.3 billion — nearly a quarter of farm income — this year and a record $45.7 billion in 2020, said FAPRI in an update to its farm income baseline. At $4 billion, “[c]onservation programs account for most 2022 government payments,” it said.
The $22-billion drop in direct payments in 2022 from this year’s level would account for nearly all of the projected 19% plunge in net farm income, a broad measure of profits. “Reduced government payments and higher production expenses explain the decline, as there is little change in farm receipts,” said FAPRI.
Farm income will total $122 billion this year, the highest since 2013, said the University of Missouri think tank. “Relative to 2020, a sharp increase in receipts from sales of crop and livestock products more than offsets the impact of higher production expenses and reduced government payments.” The income estimate is higher than the Sept. 2 USDA forecast of $113 billion. Receipts from corn, soybean, and other crops will be higher than the USDA projected.
If farm income drops to $99.3 billion in 2022, as forecast by FAPRI, it would be well above the 10-year average of $90 billion a year, based on USDA data from 2011-20.
Like the USDA, FAPRI said farm assets were rising in value more rapidly than farm debt was increasing at present, meaning a stronger financial footing for the sector. “Lower projected farm income halts the rise in farm real estate values in 2023 and the debt-to-asset ratio again begins to increase,” said the think tank. The debt-to-asset ratio is a commonly used gauge of farm-sector health. The ratio will be 13.5% this year, said FAPRI, and reach 14.9% in 2026.
The FAPRI baseline update is available here.