State of the Farm Economy in Late 2023

During a recent webinar, the staff at Agricultural Economic Insights looked into the current economic conditions in agriculture and what might be coming in 2024. Brent Gloy, co-founder of AEI, says the last three years have seen an above-average farm economy.

“This surprised me a little bit. USDA just adjusted the 2022 net farm income to the all-time record high in 2022,” according to Gloy. “Now it surprised me a little bit. I know, on our farm, it was probably our best year ever. We had very high prices for commodities, and we had quite a bit of government farm program payments in that year. So, it was a very good year.”

While the USDA forecast is for lower profits this year, Gloy says the income level is still high compared to past years. He says, “2023 is forecast to be down a bit but still at a high level. As we’re going into this situation that we’re watching right now, where we’re starting to see commodity prices fall substantially, we’re coming off of three pretty good years, and I think that’s important to remember.”

David Widmar of AEI says the drop in farm income from 2022 to 2023 is large, but it’s important to keep things in perspective.

“It was a big number, $40 billion, almost a 25 percent decline,” according to Widmar. “That sounds like a shocking, scary number, especially when you put it in the context of high production expenses, high fertilizer, and high interest rates, But as we talked about earlier, it’s still historically a really strong year. It is the artifact of coming off of a record-high number. When you start to revert to the mean after record highs, you’re going to have some big adjustments.”

Widmar talks about what’s driving the drop between 2022 and 2023. He says, “Value of animal production; a lot of this is coming out of the hog sector, and poultry is not doing very well also. So, a lot of the farm economy hits came out of the animal side. Higher production expenses accounted for about $16 billion, lower direct payments of almost $5 billion, and interest expense. That one kicked in at almost $9 billion of extra upturn here.”

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