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2024 farm income to face biggest annual decline since 2006

USDA finds lower crop receipts and higher costs continue to squeeze farm-gate profit margins.

Jacqueline Holland

February 7, 2024

6 Min Read
Hundred dollar bill in soil
Getty Images/ekinyalgin

Author’s note: Unless otherwise specified, all figures have been adjusted for inflation using the GDP deflator published by USDA’s Economic Research Service in the latest Farm Sector Financial Indicators report. USDA-ERS is forecasting inflation at 2.2% in 2024. Adjusting for inflation (or using real prices) allows comparison between revenues and expenses across different time periods.

USDA’s Economic Research Service released its first look at 2024 net farm income on Wednesday morning, showing that net farm income is expected to fall 27% ($43 billion) from last year’s earnings to $116.1 billion in 2024.

If realized, that would be the largest single-year decline in annual farm income since 2006. It marks the largest two-year decline in net farm incomes since 1982. 2024 second straight year of declining farm profits, driven in large part by a 6% decrease in cash receipts expected in the next 11 months.

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Net farm income hit a record high of $196.4 billion in 2022 but will likely decline by 46% in the two years following. Current net farm income levels are comparable to 2020 earnings.

The big driver of lower cash receipts? Declining crop commodity prices. ERS expects that cash receipts received from crop sales will decline over 8% through 2024 to $245.7 billion. Livestock cash receipts are also expected to dip this year, though only by 4% to $239.8 billion.

Related:5 ways to improve your farm’s bottom line in 2024

In the span of history, 2024’s cash receipts from crop sales are still going to be relatively strong, ranking as the 12th largest on record. In fact, 17 of the top 20 years for cash crop receipts have been recorded consecutively since 2008, reflecting favorable profitability prospects for row crop farmers in the current millennium.

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Specifically, ERS expects that lower corn and soybean prices will be the most significant driver of lower cash receipts earned by farmers in 2024. Economic simulations suggest that more quantities of grain will be sold this year than in the previous, but the lower prices will keep cash receipts lower than last year.

ERS anticipates that average net cash farm income will decline for all major row crops, including corn (-35%), soybeans (-42%), cotton (-30%), and specialty crops (-13%), but that wheat farms will see the largest annual decrease in net cash farm income in 2024 (-52%).

There are several reasons for this – wheat operations tend to incur more expenses than other types of row crops with less yield returns. Wheat farms also tend to have the highest percentage of income coming from government payments, which will continue to shrink in 2024.

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Increases in pesticide, seed, and fertilizer expenses are also expected to hit wheat growers more impactfully in 2024 than corn and soybean counterparts. Wheat prices are also retreating from high levels in 2022 and 2023, so the bigger hit to wheat growers’ income statements also reflects global production and logistic improvements in the aftermath of the pandemic and Russia’s unprovoked invasion of Ukraine.

Cash receipts from livestock are expected to shrink largely due to a smaller cattle herd from which to earn revenues. Feed costs are forecasted high for 2024, but that could change. ERS uses historical trend data to forecast this estimate and recent data – though currently falling – continues to be high relative to historical standards.

Costs keep rising

The lower revenues will increasingly come under strain as 2024 production expenses are expected to increase 1.6% from the previous year. ERS ranks 2024’s anticipated farm expenses of $455.1 billion at the fifth-largest annual cost since record keeping began in 1910. Expenses will be higher than the previous two years but will still be lower relative to prices between 2012-2015.

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Specifically, feed and labor costs will remain on the uptick in 2024. Livestock purchases are expected to be 8% more expensive this year amid a smaller cattle herd. Labor expenses will see the next big annual increase, rising 7.4% from 2023.

Notably for row crop producers, costs of pesticides (+7.2%), seeds (+4.7%), and fertilizer (+4.3%) will continue to rise in 2024, reflecting historically high prices for these inputs.

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But even though expenses continue to go up, there is some optimism to be gleaned by farmers. ERS is forecasting 2024 inflation at 2.2%, so the increase in farm production costs this year will be less than that of overarching inflationary pressures that continue to linger over the economy.

Fuel prices (-7.4%) and rent costs (-2.2%) are also expected to decrease, which could help take the heat off higher operating costs for the 2024 growing season.

Financial recap

To be sure, it will still be a profitable year for the farm economy. Net farm incomes in 2024 are expected to rank as the 24th largest on record. Over the past five years, net farm incomes have all ranked in the top 26 for total annual earnings, reflecting high commodity prices that have insulated farm income statements from losses during a turbulent macroeconomic period. The Plains will see the most belt-tightening in the next 11 months, though growers in the Heartland won’t be far behind.

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The higher interest rate environment and tighter operating margin means that the U.S. farm economy’s debt service ratio will rise in 2024 as farmers increasingly direct operating income into debt payments. Bankruptcy rates for 2024 have yet to be forecasted, but it is worth noting that bankruptcy rates in 2023 were at the lowest level since 2004 – less than one farm per 10,000.

But the farm balance sheet remains strong. Farm equity has been increasing every year since 2019, due in no small part to high land values. Debt has generally increased in recent years, but that dynamic largely reflects real estate purchases.

This also tells us that even though the margins might be tighter in 2024 relative to the past couple years, the farm economy should largely remain profitable through the remainder of this year.

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2023 forecast updates

Time and extra data provided ERS with more reliable information to forecast 2023 net farm income values, which led ERS to increase 2023 net farm income by 3% from previous estimates to $159.2 billion. It is the 11th largest annual net farm income estimate since 1910.

Even though higher expenses took a bite out of operating revenues, commodity prices remained high enough to support the greater costs. Plus, 2023 was always going to have a hard time besting record net farm income level recorded in 2022. Even though the margins were slightly tighter, last year was still a profitable year for the U.S. farm economy.

For more information, check out USDA-ERS’s Farm Sector Income & Finances website.

About the Author(s)

Jacqueline Holland

Grain market analyst, Farm Futures

Holland grew up on a dairy farm in northern Illinois. She obtained a B.S. in Finance and Agribusiness from Illinois State University where she was the president of the ISU chapter of the National Agri-Marketing Association. Holland earned an M.S. in Agricultural Economics from Purdue University where her research focused on large farm decision-making and precision crop technology. Before joining Farm Progress, Holland worked in the food manufacturing industry as a financial and operational analyst at Pilgrim's and Leprino Foods. She brings strong knowledge of large agribusiness management to weekly, monthly and daily market reports. In her free time, Holland enjoys competing in triathlons as well as hiking and cooking with her husband, Chris. She resides in the Fort Collins, CO area.

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