In its first foray into forecasting farm income for 2022, USDA is projecting net farm income of $113.7 billion dollars, a drop of about 4.5%. This despite cash sales receipts for farmers projected to be up 6.8%. A big reason for the forecasted drop in profits is a 5% increase in production expenses, and it’s not just one or two items.
“Most every line within those production expenses are showing year over year increases,” says USDA Chief Economist Seth Meyer.
Leading the list of projected increases is, according to Meyer, you guessed it, “Fertilizer. Prices are showing a 12% increase in outlays. Remember, it’s outlays. It’s not simply a spot price now versus a spot price a year ago. It’s overall outlays, so you will have a quantity adjustment by producers, but 12% is still a pretty big year-over-year number. And when you look at two years, it’s about a 30% increase over a two-year period.”
The next highest increase in costs is interest rates, which could go up 10%. Farmers will also spend more on livestock, feed for the livestock, labor, fuel, pesticides, and property taxes.
Meyer says another reason for the projected drop in farm income is the decrease in government payments.
“They’re expected to fall $15.5 billion, or 57%.”
So, yes, it does appear there will be less opportunity for profit in 2022 than there was in 2021, but as Meyer puts it, “still pretty good farm income.”
It is still above the average of the last 20 years.
Source: USDA Radio Newsline