Farm Incomes Face Tough Road Ahead

Katie Micik Dehlinger
By  Katie Micik Dehlinger , Farm Business Editor
(Getty images; Photo Illustration by Barry Falkner)

A farm income tipping point could be on the horizon. USDA forecast net farm income at $147.7 billion in early September, $7.3 billion more than 2021. While it's a big top-line number, what that means on the farm level is a little less clear.

Each year, Kansas State University agricultural economists use a subset of grain farmers in the Kansas Farm Management Association database to make a prediction that's easier to conceptualize. Its forecast for 2022 is that a typical grain farm will earn a net income of $133,000, down from the $190,966 in 2020 and $355,467 in 2021.

"Before last year and the year before, everybody would be jumping up and down with $133,000. Now, it's just OK," says Allen Featherstone, Kansas State University (KSU) Agricultural Economics department head. One big difference is government payments.

There were lots of them in 2020, including Market Facilitation Program payments to help offset damage from the trade war with China and COVID relief funds, amounting to about 72% of Kansas' farms' net income that year. Government payments dropped to 19% the following year.

Without any ad hoc payments in sight, government payments could very well be zero in 2022 since the Agricultural Risk Coverage (ARC) program and Price Loss Coverage (PLC) program aren't expected to pay this year, Featherstone points out.

It will be much more difficult to mitigate the cost of inputs in the upcoming growing season unless fertilizer prices drop, which KSU ag economist Gregg Ibendahl says is unlikely.

Using trend line yields and futures market prices, Ibendahl's forecast shows net farm income for Kansas growers in 2023 in the red by $45,888, indicating most are set to lose money. But, he cautions that in a volatile market such as this one, the outlook for next year could turn on a dime.


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