February 24, 2022

Farm Income Forecast Above Average for Second Year

Farm Income Forecast Above Average for Second Year 

By: Sydney Sheffield 

The United States Department of Agriculture’s (USDA) Economic Research Services (ERS) has published the 2022 Farm Sector Income Forecast. The report measures, forecasts, and explains indicators of economic performance for the U.S. farm sector and farm businesses by resource region and commodity specialization. The analysis helps identify subsectors and business types that are performing particularly well, or poorly, relative to past trends and to other types of farms.

Net farm income is forecasted to have increased 25% in 2021 compared to 2020 and is forecast to decrease by 4.5% in 2022, relative to 2021. Forecast at $113.7 billion in 2022, net farm income would be 15% above its 2001–2020 average when prior years are adjusted for inflation. In inflation-adjusted 2022 dollars, net farm income is forecast to decrease by $9.7 billion in 2022 from 2021. It would be the second year in a row that net farm income increased drastically, supported by strong commodity prices and a surge in exports. If the forecast is accurate, 2021 and 2022 would be the highest years for farm income since 2013. 

“The first look at 2022 is promising but I do think the year will be very volatile,” said Joe Glauber, Senior Research Fellow at International Food Policy Research Institute. There were “so many uncertainties,” he said, listing fertilizer prices, a drought that is cutting into corn and soybean production in South America, supply chain disruptions at home, and below-normal precipitation in the western half of the United States as the growing season nears.

The ERS report notes that direct Government payments are forecast to fall by 57% from 2021 to 2022. The decrease is not surprising due to lower supplemental and ad hoc disaster assistance for COVID-19 relief in 2022 compared with 2021. Meanwhile, total production expenses, including operator dwelling expenses, are forecast to increase by 5% in 2022. Spending on nearly all categories of expenses is expected to rise with large increases in feed and fertilizer-lime-soil conditioner expenditures.

Farmers are saying production expenses will be far greater than forecast. Lance Lillibridge, president of the Iowa Corn Growers board told the Des Moines Register, "I think incomes will be significantly in the red," adding that he expects his fertilizer costs will be $190,000 more than last year by the time the season ends.

The USDA farm sector income forecast is available here.