Swimming upstream economically
But total farm production expenses are also expected to be way up this year compared with last year, according to USDA’s Economic Research Service’s “2022 Farm Sector Income Forecast,” which was released Dec. 1.
Total cash receipts from the sale of agricultural commodities in the U.S. is forecast to reach $541.5 billion this year, which is $105.7 billion or 24 percent more than the 2021 total.
This is a record for farm cash receipts in the United States and follows an 18 percent increase in total farm cash receipts in the U.S. in 2021.
However, farm production expenses in the U.S. have also soared this year, which has had an impact on net farm income, which is the farmer’s paycheck.
According to the USDA farm income forecast for 2022, total farm production expenses in the U.S. are forecast to increase by $70 billion this year – 19 percent higher than 2021 – to $442 billion.
The $70 billion increase in farm production expenses represents the largest year-over-year increase on record.
Nearly every category of expenses is forecast to be up significantly this year.
“The growth in production expenses is exceeding inflation,” USDA officials said Dec. 1 during a webinar outlining the highlights of the 2022 Farm Sector Income Forecast.
According to the USDA-ERS forecast, expenses for fertilizer and soil conditioners are forecast to by up 47 percent this year compared with 2021, and feed expenses are forecast to be up by 17 percent.
Interest expenses are up 41 percent and fuel and oil expenses are up 47 percent
So, while total U.S. farm cash receipts increased by an estimated 24 percent this year, when expenses are subtracted, total U.S. net farm income is forecast to be up 14 percent in 2022.
Total U.S. net farm income, a broad measure of profits, is forecast at $160.5 billion in 2022, a $19.5 billion increase over 2021.
Adjusted for inflation, total U.S. net farm income is forecast to be up by 7 percent this year compared with 2021.
The increase in net farm income in 2022 occurred despite a hefty decrease in total government farm payments. According to USDA-ERS, total federal government farm payments are forecast at $16.5 billion in 2022, which represents a 36 percent or $9 billion decrease from 2021.
Most of the decline in government farm payments is due to much lower assistance related to COVID-relief programs.
According to the USDA-ERA forecast, balance sheets for U.S. farmers and ranchers are forecast to have strengthened in 2022.
“Farm sector solvency is forecast to improve,” USDA officials said during the Dec. 1 webinar.
Debt-to-asset and debt-to-equity ratios for U.S. farmers are both forecast to have improved in 2022. However, USDA officials stressed that is for the U.S. agricultural sector as whole.
“There is a lot of variability in the amount of debt held by individual farms,” they said.
USDA-ERS is forecasting the U.S. farm bankruptcy rate will decline in 2022 to less than 1 operation per 10,000 farms, which would bring the U.S. farm bankruptcy rate to its lowest level since 2004.
Most of the increase in farm cash receipts this year is due to higher commodity prices, according to the USDA-ERS report.
For example, while total farm cash receipts are forecast to rise by $105.7 billion this year, $96.8 billion of that total is directly attributed to higher commodity prices.