In its first foray into forecasting farm income for 2022, the USDA projects net farm income of $113.7 billion, down about 4.5%. This is despite farmers’ cash receipts expected to increase by 6.8%. A big reason for the expected decline in profits is a 5% increase in production expenses, and it’s not just one or two things.
“Most lines of these production expenses are showing year-over-year increases,” says USDA chief economist Seth Meyer.
Topping the list of planned increases is, according to Meyer, you guessed it, “Fertilizer. Prices show a 12% increase in spending. Remember, these are expenses. It is not simply a spot price today versus a spot price a year ago. This is the overall spend, so you will have a quantity adjustment by the producers, but 12% is still a pretty high number from year to year. And when you look at two years, that’s about a 30% increase over a two-year period.
The next highest cost increase is in interest rates, which could increase by 10%. Farmers will also spend more on livestock, feed, labor, fuel, pesticides and property taxes.
Meyer says another reason for the projected drop in farm income is lower government payments.
“They are expected to drop $15.5 billion, or 57%.”
So, yes, it looks like there will be less opportunity for profit in 2022 than in 2021, but as Meyer says, “still pretty good farm income.”
It is still above the average of the last 20 years.
Source: USDA Radio Newsline