After a record year in 2022, US farm net income is forecast to fall for the second straight year in a row, to be down 40% from the peak.
The lastest US Department of Agriculture Farm Sector Income Forecast anticipates that the sector will generate US$116 billion in calendar 2024, a drop of $US39.8bn, or 25.5% compared to last year.
That follows a drop in income of $US30bn or 16% last year. The USDA calculates net farm income by subtracting farm expenses from gross farm income. If the forecast holds true, US farm net income will be below the 20-year average.
The decline is driven primarily by a fall in expected cropping receipts, particularly corn and soybean. Corn revenue is expected to be 14% down, due to higher global output impacting prices, while soybean receipts will fall 10%. Cotton is up slightly (1.6%) while wheat (-0.5%) will decline as lower prices fail to offset higher production.
While the smallest US herd in 73 years is putting a floor under cattle prices, the USDA anticipates that that reduced supply will lead to lower revenue for the beef industry this year.
Cash receipts from cattle and calves are expected to decrease $1.6 billion (1.6%) to $US98bn. It is still a significant improvement, with the exception of last year. In 2021 net farm income for cattle was $US73bn.
Dairy is expected to fall 2% on lower prices in 2024.
In nominal terms (non-inflation adjusted), costs will rise 3.8%, driven by labour costs and livestock and poultry expenses.
Labour costs are expected to rise 7.4% in 2024, while livestock and poultry expenses are forecast to rise 19%. The USDA does not break down this line item by segment, however, the US Farm Bureau’s recent Market Intel report had this to say about the US restocking market.
“The smallest calf crop since 1948 and a 1% decline in replacement beef heifers from last year indicate that when the current supply of cattle on feed dries up, there won’t be as many cattle available to refill the supply chain. This could send beef prices to record levels in 2024 and 2025, as we hit the supply bottom of the current cattle cycle.”
Fertiliser expenses fell 17.5% in 2023, compared to 2022 due to lower fertiliser input prices. They are expected to grow 4.3% in nominal terms this year, however.
The fall in energy prices is also benefitting the sector. Fuel costs are expected to drop 7.4% this year following a 12% drop last year.