Ag Informer – US Net Farm Income to Drop

After two record-setting years in a row, U.S. net farm income will decline sharply in the near term, pulled down by lower crop and livestock prices, though it will remain well above its 10-year average, said FAPRI on Wednesday. The University of Missouri think tank said food inflation would drop to 4.4% this year — less than half of last year’s rate — and run at 2% in following years.

FAPRI’s projections assumed a return to normal weather and yields, which would calm markets that were jolted in 2022 by the Russian invasion of Ukraine, smaller-than-expected U.S. crops, and a global outbreak of bird flu.

When other USDA spending, particularly for land stewardship, is included, net government outlays on agriculture would run between $22 billion and $29 billion annually over the next five years, the usual life of a farm bill.

FAPRI said net farm income would fall 22% this year from the record $168.7 billion of 2022, steeper than the USDA’s estimate of a 16% drop. Income would fall again in 2024, by 14%, and then be fairly steady for rest of the decade, it said. The 10-year average for net farm income was $99 billion annually, according to USDA data.

Farm production expenses, after setting a record in 2022, will rise 2.5% this year, estimated the think tank. “Lower prices for some inputs result in a reduction in production costs in 2024 and 2025,” it said.

After the food inflation rate of 9.9% in 2022, “price increases have slowed in recent months, and the projected annual increase in consumer food prices is 4.4% in 2023 and under 2% in 2024,” said the report.