“Prospects for 2024 farm income increased slightly, though income is still expected to fall below its 2023 level,” said the Chicago Fed, describing changing conditions since the April 17 version of the Beige Book. “Corn, soybean, and wheat prices moved higher. Most livestock prices were up, though egg prices were down. Continuing concerns about the financial impact of avian influenza in cattle were offset by additional support from the federal government.”

The Dallas Fed said that “the spread of avian influenza among dairy cows remains a concern for milk supply, though it is not a food safety issue due to the pasteurization process.” With drought conditions easing, cotton production should increase this year, it said, but cotton prices “have slipped. Most other crop prices rose … while cattle prices eased off highs.”

“Conditions in the Tenth District agricultural economy softened through early May and farm finances tightened slightly,” said the Kansas City Fed. “Corn, soybean, and wheat prices increased slightly since April but remained weak, keeping profit opportunities narrow.”

The Minneapolis Fed said agricultural conditions in its district “remained weak amid some positive developments,” including a moderation in production costs. The St. Louis Fed said higher labor costs were “an additional stressor” in its region.

“Row crop farmers struggled amid low demand and excess supply, and many do not expect to turn a profit this year,” said the Atlanta Fed. “Poultry producers saw some improvement in revenues from domestic sales, attributed to reduced supply resulting from avian influenza.” Some sawmills on the West Coast closed this spring due to sluggish demand, said the San Francisco Fed.

Source:

Net farm income is the profit farmers see after paying for operating expenses. Two major factors are impacting income forecasts – lower prices paid to farmers for crops and livestock, and increased costs for supplies. While these are early estimates and they could change throughout the year, USDA anticipates a decrease in net farm income, moving from $156 billion in 2023 to $116 billion in 2024.

“Farm families are suffering through the same economic hardships as all families in America,” said AFBF President Zippy Duvall. “High inflation is making the food farmers grow more expensive to produce, and is cutting into the income farm families rely on to pay bills, provide an education for their children, and reinvest in their community. We urge Congress to focus on bringing costs down and passing a new farm bill, both of which will help ensure farmers can continue meeting the needs of a growing nation.”

The Market Intel explains, “Cash receipts for crop and livestock sales are expected to move from $507 billion in 2023 to $486 billion in 2024 for a loss of $21 billion (4%). The forecast decline in crop receipts explains nearly 80% of this difference, signaling a weaker incoming year for row crop prices.”

Production expenses remain stubbornly high as well. Transportation, labor, pesticide and fertilizer costs are all hitting farmers’ bottom line. Production expenses are estimated to increase 4%, or $16.7 billion, in 2024, totaling $455 billion in 2024.

Source:

Farm Profit Cycles Still Exist: When business is doing well, many of us have a tendency to think (hope) that it will only continue to get better. At the bottom of profit cycles when we are making very little money or possibly even losing money, attitudes become negative and we have a tendency to think that it may stay that way for a long time. That has never been the case either on the top side or the downside. High prices and profits are almost always followed by lower prices and then the cycle repeats itself back to the upside.

The Sky is Falling: That’s what some people think. Fortunately, that is not going to be the case at all. On the negative side, farm incomes will likely be down this year. The USDA is forecasting a 26% drop in net farm incomes from last year. However, that is still the second highest profit in history! We have been spoiled by three years of record high farm profits. That can never go on forever.

Granted, cash corn prices are down approximately 30% from the highs made in June. Cash soybean prices are down about 16% for the same time frame. This results in a few negative attitudes but doesn’t reflect on all of the good factors that will impact farmers and equipment manufacturers this coming year.

Consider the following five points:

1. Debt-to-equity ratios are still extremely low. The value of farmland has risen much faster than debt levels.
2. Equity and net worth of grain producers is at an all-time high. Because of high cash incomes over the last three years, many farmers have used very little if any of their credit lines.
3. Fertilizer and chemical prices have plummeted. Cost of production this coming year will be down considerably.
4. The revenue insurance prices are often not being factored into the equation. For this year’s crop those prices are $13.78 for soybeans and $5.91 for corn. Granted, producers will not receive that on 100% of the their crop but many will receive that on 70-80% of their crop. Still going to be a good year for them.
5. Producers want and need the newest technologies.

In summary, I would agree with those that think farm equipment sales might be a little softer this year. Let’s also remember that there is still leftover pent-up demand from the lack of availability of equipment over the last two or three years. This is going to be a very good year—just not a record one.

Richard Brock is owner and president of Brock Associates, an agricultural marketing advisory service and publisher of The Brock Report, established in 1980. He manages grain sales on over 800,000 acres throughout the U.S. and is an advisor on purchasing strategies for many large poultry, pork, dairy and food companies.

Don’t miss Brock’s presentation at the Marketing & Distribution Convention during the General and Business Session on Wednesday, Nov. 1 at 1:00 p.m.

With good times in the farm sector, the value of farm assets would climb 10% this year, following a 10% increase in 2021 — the No. 2 year for farm income — said the USDA in its Farm Income forecast, issued three times a year. Farm debt would climb more slowly, and the debt-to-asset ratio, a measure of financial health, would drop to 13.05%, its first decline since 2011.

Crops and livestock will generate $541.5 billion in cash receipts, up 24%, or nearly $106 billion, from last year. Almost all of the increase, $96.8 billion, would be the result of higher prices, calculated USDA economists. Corn, wheat, and soybean would fetch an additional $37 billion this year compared to last. Higher broiler chicken prices would boost receipts by 55%. Revenue from cattle, hogs, turkeys, and milk also would climb. “Cash receipts for chicken eggs are expected to more than double,” said the USDA.

Commodity prices boomed with the return of China to the U.S. market in fall 2020, and they surged again after the Russian invasion of Ukraine last February. The invasion disrupted grain and fertilizer exports from the Black Sea region. Ukraine and Russia are major wheat exporters, and Russia leads in fertilizer exports.

Farm production expenses were forecast to rise 18%, to a record $442 billion this year. “This would represent the largest year-to-year dollar increase in nominal terms on record,” said the USDA. Nearly every category of expense would go up. Fertilizer, lime, and soil conditioners would increase by 47%, fuel and oil by nearly 48%, interest costs by 41%, and livestock feed, the largest category, by 17%.

Farm groups have focused on the rise in expenses and have asked lawmakers, with a new farm bill to be written in 2023, for higher reference prices, a factor in calculating crop subsidies, and more protection through the government-subsidized crop insurance program.

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“Crop cash receipts are projected up nearly $38 billion, livestock cash receipts are up nearly $27 billion, and then production expenses are up $26 billion,” said Scott Brown from the University of Missouri. “The combination of all those changes in 2021 relative to 2020 is what gives us higher net farm income.”

That projection is up by 20 percent compared to the 2020 projection and 49 percent relative to the average farm income from 2015 to 2019.

The USDA has also lowered its 2019 and 2020 farm income estimates by $4.1 billion and $26.6 billion, respectively.

Brown said “crop cash recipes were revised downward by $11.8 billion but then also cash expenses were increased by $11.7 billion dollars. The combination of those things led to the revisions.”

He also said the additional funding from the government did not have the anticipated impact on income in 2020.

“Those 2020 levels, now $98.3 billion, are frankly very comparable to 2019 estimate of $94 billion,” he said. “Even with the $45.7 billion of government payments in 2020, it only helped to offset the otherwise tough situation that we saw in terms of cash receipts and then higher expenses. It wasn’t the boost some of the earlier February numbers suggested.”

Source: Brownfield Ag News

The drop follows a historic year in which net farm income increased by an estimated 45.7 percent, the result of programs such as the Coronavirus Food Assistance Program. Direct payments from the government to farmers in 2021 is forecast to decrease by 45.3 percent, or $21 billion, compared to 2020.

The ERS forecasts that farm cash receipts will increase by 5.5 percent this year. Total production expenses are forecast to increase 2.5 percent. The rise in costs will be tied primarily to feed, fertilizer, and labor.

Source: ERS

All payments in 2020 are forecast at $32.6 billion, with $11 billion coming from the first Coronavirus Food Assistance Program (CFAP) and $13.3 billion coming through the second CFAP. Also included are $5.9 billion in PPP loans, which will be forgiven if requirements are met, and other payments at $2.4 billion.

USDA released its latest Farm Income and Financial Forecasts on Dec. 2, factoring in the November World Agriculture Supply and Demand Estimates and other data.

The forecast covers about 2 million farmers who operate about 900 million acres of land.

With the boost in government aid, which is on top of the 64 percent increase in 2019, farmers are projected to see a 43 percent increase in net farm income in 2020.

Source: Farm Progress

The last time federal payments accounted for a greater percentage of farm income was 2001 at 41 percent.

USDA economists expect farm income to rise by 23 percent compared to 2019, primarily driven by assistance available in response to trade wars, COVID-19, and weather disasters.

The estimated $37.2 billion in subsidies would be the largest on record, said a USDA official. Cash receipts from crops and livestock were forecast to dip by 3 percent, partially offset by a 1 percent decline in out-of-pocket expenses.

Agriculture Secretary Sonny Perdue said Monday that he hoped to announce a new version of coronavirus relief as soon as this week.

Forecasts also suggest that farm debt will rise at a faster rate than the value of farm assets this year, contributing to a rise in the debt-to-asset ratio, a widely used gauge of financial health. The ratio has been climbing slowly since 2012 and was forecast for 16.2 percent this year. The ratio is low by historical standards.

Along with its revisions to the 2020 income forecast, the USDA lowered its 2019 income figure to $83.7 billion, a drop of nearly $10 billion due to higher expenses and somewhat lower income.

Source: Successful Farming

About 580 farmers filed for chapter 12 bankruptcy protection in the 12-month period ended June 30, according to federal data. That was 8 percent more than a year earlier, though bankruptcies slowed slightly in the first half of 2020 partly because of an infusion of federal aid and hurdles to filing during the pandemic, according to agricultural economists and attorneys.

The pandemic has pressured prices for many commodities, squeezing farmers who raise crops and livestock, and prolonging a six-year downturn in the Farm Belt.

The Trump administration is expected to distribute a record $33 billion in payments to farmers this year, according to the University of Missouri’s Food and Agricultural Policy Research Institute. The funds, including those intended to help farmers hurt by trade conflicts and the coronavirus, would push government payments to 36 percent of farm income, the highest share in nearly two decades, the institute said.

“Agricultural markets have been horrible, and the pandemic exacerbated it, big time,” said Paul Swanson, an attorney based in Oshkosh, Wis. He said he has 40 open farm-bankruptcy cases, about a third more than last year.

Before the pandemic, a global grain glut and foreign competition had pushed down agricultural prices. Trade disputes deepened the pain, drawing retaliatory tariffs from top buyers of U.S. farm commodities, such as China and Mexico.

Then the coronavirus hit, upending the U.S. food-supply chain. As restaurants closed, farmers plowed under thousands of acres of vegetables and dumped milk into manure lagoons. Hog farmers have lost nearly $5 billion in actual and potential profits for 2020, according to the National Pork Producers Council. In California, agricultural businesses stand to lose as much as $8.6 billion, according to a study commissioned by the California Farm Bureau Federation.

Robert Johansson, the USDA’s chief economist, spoke at the annual Agricultural Outlook Forum and predicted ag trade will “return to normal” this year, with farm exports to China rising from $10 billion in fiscal 2019 to $14 billion in 2020.

Those projections are lower than numbers discussed when the phase-one trade deal with China was announced.

Secretary Sonny Perdue spoke with reporters after Johansson’s presentation to say that China’s import commitments were “not included in those [estimates] in that way. We expect to exceed that, certainly.”

Johansson noted the potential impact of the coronavirus outbreak and said it is causing “many disruptions in shipping and supply chains.”

He also warned of “intense” competition from Brazil and other nations expanding their crop production.

Ultimately though, the economist said there are “more hopeful signs” for the farm economy in 2020 after a brutal stretch for producers bruised by trade troubles and historic flooding across the Midwest.

Perdue said farmers would need to navigate the market on their own in 2020, now that the U.S. and China have reached a deal on agricultural exports.

The following day, however, President Trump announced through Twitter that trade assistance is possible if farmers continue to suffer. Perhaps what farmer can know for certain is that their challenges have won the attention of leaders in D.C.

USDA expects corn and soybean acreage to rebound by 5 percent and 12 percent, respectively.