2022 Farm Income Predicted Higher, But Inflation is Real

Sep 6, 2022

This just in… The USDA released its Farm Income Sector Forecast last week, anticipating a 5.2% net farm income increase to $147.7B from 2021’s $140.4B. This is welcome news, considering the original estimate of a 4.5% decrease, which they released in February.

Not all rainbows and butterflies: When adjusted for inflation (of course), net farm income actually declines .6% from 2021. On the bright side, it’s still 42% above the 20-year, inflation-adjusted average of $104B.

Meanwhile, net cash farm income is predicted to increase by 8.7%, reaching a number that hasn’t been seen since 2012.

The math: Net cash farm income = [cash receipts from farming + farm-related income (government payments included)] – cash expenses

Why the boost? Crops and livestock production are expected to bring in receipts 21% higher this year. Higher commodity prices lead to higher cash receipts.

Corn, soybeans, and wheat are all looking at double-digit increases compared to 2021 and comprise the majority of cash receipt increase projections.

Put simply, higher prices are the culprit for a more than 80% increase in cash receipts, while a measly 9% is linked to volume changes.

ICYMI: Input costs have been the opposite of low this year. In fact, the increase in production expenses is the largest year-to-year dollar increase on record, at 17.8%, according to the Economic Research Service (ERS).

Fertilizer (including lime and soil conditioner) expenses are expected to hit a 52% increase (ouch!).

The bottom line: The raw numbers might show that profits are up, but inflation and harvest uncertainty have added some question marks to how much that increase will actually be felt. The next few months will be very telling.