As an agricultural economist, Bart Fischer candidly admits that he hates the use of USDA net farm income measure to gauge the economic health of U.S. agriculture. He says the net farm income number doesn’t provide a clear picture of the ag economy.
USDA reports that net farm income is now above the long-run average, despite significant drops over the past two years. U.S. net farm is forecast to decrease $6.5 billion (4.4%) to $140.0 billion in 2024 from $146.5 billion in 2023. Net farm income in 2023 decreased $35.6 billion (19.5%) from $182.5 billion, a nominal record.
Fischer, Agrilife co-director and associate professor, Agricultural and Food Policy Research Institute, Texas A&M University, notes that the net farm income forecast for 2024 masks significant declines in cash crop receipts and more robust returns in the livestock sector.
“You talk to growers, they don’t feel like they’re above the long run average. Certainly, part of this is influenced by how much cash was infused in the system, even in agriculture in the aftermath of COVID, 90 billion dollars even in the ag sector was infused. That led to the huge spike in the middle,” Fischer said at the Ag Allies Conference sponsored by the NC Chamber at the North Carolina State University McKimmon Center in Raleigh on Oct. 11.
2025 outlook
Fischer offered a bleak outlook for the 2025 crop year to come and emphasized that a new farm bill needs to be passed and signed into law this year to help farmers navigate the challenges ahead.
He noted that despite pressure on row crop producers, federal direct payments are now at a 42-year low, the lowest since the farm crisis of the 1980s.
Moreover, U.S. agriculture is facing multiple years of record trade deficits with growing competition from Brazil. Fischer said China is becoming less dependent on U.S. agriculture, but U.S. agriculture remains dependent on China.
Fischer said interest expenses are weighing heavily on net farm income. Both interest expenses and cost of labor are increasing costs to farmers, with the former at their highest level since the 1980s.
“The good news is if you look at a lot of other indicators, delinquencies and so forth, we are nowhere near that level yet. I just look at is as a cautionary tale. We’ve got growers extremely exposed right now and going into a new crop year even more exposed,” Fischer told the Ag Allies Conference.
“If we don’t do something about that what does that portend for economic realities in 2025? To me that part is pretty concerning. I’m not standing up here today being alarmist saying we’re heading for a 1982 again, I’m saying some of these indicators are starting to point in that direction, and there are opportunities to actually do something about it, but we are quite a way aways from that.”
Pressure on farmers
Fischer said farmers are feeling pressure everywhere. Demand pressure, oversupply pressure, high ending stocks of commodities, and a high stocks to use ratio for commodities is putting a squeeze on profits for farmers. On top of all this, the cost of production is not going down.
“My concern is what happens when we move into next year and we have another year of this knowing that there is not much protection sitting out there for growers,” Fischer said.
“Title 1 of a farm bill is designed to help on the row crop side when prices collapse. In 2024 we’re projected to spend less on direct government assistance than we’ve had since the height of the farm crisis and the infusions we saw,” Fischer said.
He said there is a lot of pressure out there with very little being done on the federal side to help.
“The conversations in Washington are that Title 1 (of the farm bill) is not doing much, so that’s why we have crop insurance. If you’re outside of the core of the Midwest, and you’re buying 70 to 75% coverage, how excited do you get about insuring 70% of 73 cent cotton? Insurance is incredibly important, but if you’re insuring well below your cost of production, that’s not going to keep you in business. It’s why we have Title 1 paired with crop insurance to navigate both of those situations,” Fischer said.
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