USDA’s Economic Research Service (ERS) will provide an updated 2024 net farm income forecast on Thursday. Even with improvements in livestock margins, the August Ag Economists’ Monthly Monitor showed the majority of ag economists expect the further deterioration in crop prices to weigh on the overall net farm income picture and force the agency to revise their forecast lower.
As the concerns about the ag economy pour in, there’s no doubt the ag economic picture has changed. The price of grain and oilseeds is down, while the livestock picture has improved since the beginning of the year.
Scott Brown, interim director, Rural and Farm Finance Policy Analysis Center (RaFF), University of Missouri, points out the net farm income situation would look even worse if it weren’t for more positive prices in livestock.
“Let’s not forget, February was the last time they did their net farm income forecast. And a lot of things have changed from early this year to where we sit today,” Brown said. “I do expect some revisions. Crop receipts are going to be lower than what they would have said back at the start of the year. Cattle probably higher. Hogs probably higher. Dairy probably higher. But I also expect production expenses at least not to go up from where they were originally in the first part of the year. So I’m curious how all those different pieces balance out at the end of the day.”
The August Ag Economits’ Monthly Monitor, a survey of nearly 70 ag economists from across the U.S., found:
- Nearly 57% expect USDA to revise its forecast
- Thirty-six percent think the revision will be 5% to 10% lower
- Seven percent think USDA will leave its forecast unchanged from February
A Look Back at February
ERS gave its first glimpse at 2024 Net Farm Income in February with the Farm Sector Income & Finances: Farm Sector Income Forecast. At that time, the USDA ERS forecast showed net farm income to fall after reaching record highs in 2022.
The USDA ERS’ forecasts showed:
· Net farm income, which is a broad measure of profits, reached $185.5 billion in calendar year 2022 in nominal dollars.
· After decreasing by $29.7 billion (16%) from 2022 to a forecast $155.9 billion in 2023, net farm income in 2024 is forecast to decrease further from the 2023 level by $39.8 billion (25.5%) to $116.1 billion.
· Net cash farm income reached $202.3 billion in 2022. After decreasing by $41.8 billion (20.7%) from 2022 to a forecast $160.4 billion in 2023, net cash farm income is forecast to decrease by $38.7 billion (24.1%) to $121.7 billion in 2024.
The Ugly Truth
The reality is glaring. USDA’s net farm income forecast for 2024 is a $43 billion drop from 2023 to $116.1 billion. That is a 25.5% decline in just one year. What makes it even more jarring is that follows the 2023 net farm income figure, which saw a 16% drop from 2022. If USDA’s forecast holds true, that will mark the most significant two-year farm income decline in U.S. history.
“The $90-billion drop over a two-year period is certainly the largest dollar value drop, adjusted for inflation, that we’ve seen in our history,” said Ben Brown, an agricultural economist with the University of Missouri. “It exceeds the previous record set in the mid-1970s. When it comes to percentage changes, we’ve seen larger percentage changes. But you’d have to go all the way back to the Great Depression era and the early 1930s to find bigger percentage declines.”
Ben Brown also thinks USDA will revise it’s forecast lower in the upcoming report, possibly even revising their 2023 forecast, as well.
“The big change I think we could see in an update would be the 2023 farm income numbers revised lower even from where they were,” Ben Brown.
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The Ugly Truth: 2023 and 2024 Will Go Down As the Two Largest Declines in Net Farm Income Ever
