Minding Ag's Business

MT. JULIET, Tenn. (DTN) -- Net farm income in 2024 is forecast to be $6 billion less than last year at $140.7 billion, USDA's Economic Research Service said. The year-to-year decline is significantly softer than the $35.3-billion drop in farm income from 2022 to 2023.

"The forecast isn't that much different from our prior forecast released in September, but somehow it feels a little more important as we near the end of the year to evaluate the current state of the farm economy as a starting point for considering what challenges and opportunities may lie ahead," said Carrie Litkowski, a senior ERS economist who leads the farm income team, in a webinar.

Net farm income aims to reflect the year the production occurred and accounts for changing grain inventories, depreciation and other non-cash expenses. Net cash farm incomes measure net expenses and receipts in a calendar year.

Net cash farm income, at $158.8 billion, is forecast $1.8 billion, or 1.1%, below the previous year. It's pegged at farmers selling more grain than they grew, reflecting the surplus inventories farmers carry from year to year, Litkowski said.

Both measures remain above their 20-year average.

USDA updates its farm income forecast in February, September and December and issues a final forecast in February of the following year. Many of the major themes remain the same as September:

-- Income prospects diverge significantly for crop and livestock producers. Crop receipts are forecast to decrease by $25 billion from 2023's levels, while animal/animal product receipts are projected to increase by $21 billion.

-- Lower corn and soybean prices will outweigh higher quantities to sell, leading to sharply lower receipts. Corn receipts are expected to fall by $16.6 billion, or 20.8%, while soybean receipts are forecast to decrease by $6.9 billion, or 12.3%.

-- Direct government payments, which exclude crop insurance and loans, are 13.6% less than last year, largely due to lower Dairy Margin Coverage Program payments and supplemental/ad hoc disaster assistance compared to 2023.

September's forecast included some major revisions from the February forecast, which initially forecast net farm income at $116.1 billion. At that time, USDA was calling for declining receipts for livestock and animal products, but that area has since become a strong spot in the income picture, with cash receipts for cattle and calves climbing $7.3 billion, or 7.2%, due to higher prices.

Another factor Litkowski said improved the farm income forecast throughout the year is that farmers paid less for inputs like feed, seed, fertilizer and fuel than ERS initially forecast.

The most recent release includes information from the November World Agricultural Supply and Demand Estimates, several more months of NASS's paid prices index, data for the Energy Information Administration, grain marketing pattern data and more.

"Despite expectations that income will continue to fall in 2024, the farm sector balance sheet is forecast to continue to improve in 2024, especially as measured by equity," she said.

Farm sector equity is expected increase by 5.2% in 2024 to $3.68 trillion in nominal terms. While debt levels are on the rise -- forecast up 4.5% -- debt-to-asset levels improved modestly, as asset appreciation outpaced debt expansion.

"The balance sheet is long term," Litkowski said. "It reflects long-term expectations or conditions within the farm sector, while the income statement is more of a short-term, year-to-year outlook."

An individual growing season may or may not affect the balance sheet, depending on a farm's financials. Overall, USDA estimates working capital levels will fall 6.9% relative to 2023.

USDA will release its final update for 2024 farm income on Feb. 6, 2025. It will release its first 2025 forecast at the same time, Litkowski said.

You can read all of the details on USDA's latest farm income forecast here: https://www.ers.usda.gov/….

A summary of September's farm income forecast is here: https://www.dtnpf.com/….

A summary of February's farm income forecast is here: https://www.dtnpf.com/….

Katie Dehlinger can be reached at katie.dehlinger@dtn.com

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