Farm income is forecast far above average for second year
Record-high expenses and sharply lower federal subsidies will erode farm income in 2022, according to a forecast by the Agriculture Department. Nonetheless, U.S. agriculture would see one of its best years on record, with net farm income 26% above its 10-year average.
It would be the second year in a row that net farm income, a USDA gauge of profitability, ran at sky-high levels, boosted by strong commodity prices and a boom in exports, with China back as the No. 1 customer. The Economic Research Service pegged income at $113.7 billion this year, down from $119.1 billion in 2021.
If the forecast holds true, 2021 and 2022 would be the highest years for farm income since the record $123.7 billion in 2013. Net farm income averaged $90 billion a year from 2011-20.
“The first look at 2022 is promising but I do think the year will be very volatile,” said Joe Glauber of the IFPRI think tank. There were “so many uncertainties,” he said, listing fertilizer prices, drought that is cutting into corn and soybean production in South America, supply chain disruptions at home and below-normal precipitation in the western half of the United States as the growing season nears.
Farm-sector production expenses were forecast at $411.6 billion this year, the highest ever and up 5% from 2021. Spending on livestock feed was forecast to rise 6%, to nearly $69 billion, the consequence of high commodity prices for grain farmers. Producers were expected to spend an additional 12% on fertilizers, for a total of nearly $32 billion, reflecting a months-long surge in prices. “Nearly all expense categories are forecast to rise during the year,” said USDA economists.
Federal subsidies would drop to $11.7 billion this year, the first year of comparatively normal spending since the Sino-U.S. trade war and the pandemic. Subsidies were a record $45.7 billion in 2020, dropping to a still-hefty $27.1 billion in 2021. Only $3.4 billion in this year’s subsidies would come from coronavirus relief programs.
Receipts from crops and livestock would climb $29 billion this year, nearly 7%, said the USDA. Milk, cattle, and broiler chickens would benefit from higher prices. Corn, soybeans, and wheat receipts would rise due to more bushels being sold. Cotton would rise on higher prices and larger sales volume. Hog farmers would see lower receipts compared with 2021.
Overall, the $20-billion increase in expenses and the $15.7-billion decline in farm subsides would overwhelm higher receipts from crops and livestock, pulling down net farm income this year, said the USDA.
The USDA estimates that farm cash receipts will climb nearly $100 billion from 2020, to $462 billion this year, a 27% increase. “Man, that is a huge change,” said Glauber. Commodity prices improved following the 2020 de-escalation of the Sino-U.S. trade war, started by President Trump in 2018.
Nationwide, farm real estate rose in value 2% during 2021 and will gain an additional 1% this year, said USDA. “That might be a surprise to folks who have been watching Midwestern land values over the last year,” said Pat Westhoff, director of the FAPRI think tank. Farmland values skyrocketed in the Farm Belt last year. Iowa values rose 29%, to their highest value ever, and regional Federal Reserve banks reported a 15% increase in the Midwest and Plains.
The USDA farm sector income forecast is available here.