The USDA is forecasting a good year for most American farmers in 2022, with net farm income expected to be up almost 14% on the year despite record high expenses.
Released last week, the USDA’s Farm Sector Income Forecast pegged 2022 net farm income, a broad measure of farm profitability, at $160.5 billion, up 13.8% or $19.5 billion from the previous year. The latest farm income forecast is much more optimistic than the government’s earlier projections in February and September, which suggested a 4.5% decline and a more modest 5.3% increase in net farm income, respectively.
When adjusted for inflation, 2022 US net farm income is expected to increase $10.7 billion (7.2%) from 2021 and be at the highest level since 1973.
The largest portion of the overall increase in net farm income is tied to a projected jump in livestock cash receipts due to higher prices. The value of livestock production (in nominal dollars) is expected to increase nearly 31%, or $60.2 billion, in 2022. In comparison, total crop receipts are expected to increase by $45.5 billion or 19% from 2021 following higher receipts for many crops, including soybeans, corn, and wheat.
Receipts for corn are expected to increase 27.6% or $19.6 billion, while soybeans are projected up 29.5% or $14.5 billion, and wheat up 23.7% or $2.8 billion. As noted by an American Farm Bureau analysis of the numbers, a whopping 91.6% of the increase in cash receipts is expected to be linked to higher prices, versus only 6.4% linked to volume changes.
Meanwhile, total production expenses, including operator dwelling expenses, are forecast to increase by $69.9 billion or 18.8% to $442 billion (in nominal terms) in 2022 – the highest ever annual increase and total dollar amount. Spending on nearly all categories of expenses is expected to rise with the largest dollar increase projected for fertilizer-lime-soil conditioner expenditures at $13.9 billion (+47%) compared with 2021.
Direct government payments are forecast to fall by $9.4 billion or 36.3% from 2021 to $16.5 billion in 2022 - largely because of lower supplemental and ad hoc disaster assistance for COVID-19 relief in 2022 relative to 2021.
But despite the increase in net farm income, the Farm Bureau said American farmers and ranchers still face an uphill battle. One of the greatest concerns is the increase in operating costs, particularly in fertilizer, energy and other inputs, it said.
“Growing hurdles related to credit access and the rising cost of financing farming operations create uncertainty for producers looking toward the next production year. Inflation and weather uncertainty are worrying as well. These issues will challenge the ability of farmers and ranchers to reach above break-even levels.”