Kansas Farm Incomes Drop

Kansas Grain Farms Remain Profitable in 2022, But Input Prices Mar Income Forecasts for 2023

Katie Micik Dehlinger
By  Katie Micik Dehlinger , Farm Business Editor
The timing of anhydrous purchases will make a significant difference in net farm income in 2022, Kansas State University economists say. (DTN file photo)

MANHATTAN, Kan. (DTN) -- Kansas State University economists see 2022 farm incomes falling from the previous year, but they're more worried about what 2023 will look like.

Gregg Ibendahl, KSU ag economist and associate professor, told attendees at the 2022 Risk and Profit Conference that he projects average net farm income for grain producers will likely be around $133,000 in 2022. His data shows Kansas net farm income at $190,966 in 2020 and $355,467 in 2021.

Government payments played a big role in the past few years' income.

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, said Allen Featherstone, Kansas State's Agricultural Economics department head.

"Before last year and the year before, everybody would be jumping up and down with $133,000. Now, it's just OK," he added.

USDA will update its farm income forecast on Thursday, Sept. 1., for the first time since Russia's invasion of Ukraine sent markets into a tailspin. In February, the agency forecast net farm income at $113.7 billion, 15% higher than the 2001-2020 average. (https://www.ers.usda.gov/…)

"I think farm income is going to be very dependent in terms of how much fuel was pre-purchased and how much fertilizer was pre-purchased," Featherstone said, adding that the picture will look much better for farmers who purchased fertilizer and fuel before Russia attached Ukraine in February. "I'm sure people were complaining about the high prices in December, but that was probably one of the best decisions they made with regard to 2022 incomes simply because of what happened in those markets."

Ibendahl said he had to update the crop budgets he uses to account for surging input prices midseason, something he hasn't had to do before.

Input prices aren't the only troubles for the Sunflower State's farmers.

"This is a very bad year for yields in Kansas," Ibendahl said. USDA estimates the Kansas wheat crop will average 38 bushels per acre (bpa); corn 123 bpa; and soybeans 40 bpa. The rest of the country, particularly the I states, are in for an average to slightly below average yields.

"So, it's kind of a double whammy for Kansas farmers. Again, low yields, but we don't get a higher price to compensate," he said. "This is a great year to have crop insurance. I hope most farmers are fully stocked up on their crop insurance because that will be a big payer and secure net farm income. ... Where it really starts to get concerning is the forecast for 2023."

Using trendline yields and futures market prices, Ibendahl's forecasts shows negative $45,888 net farm income in 2023. Fertilizer and fuel remain high-dollar expenses, and while they've softened lately, his model forecasts an average price of $1,200 per ton of anhydrous.

"I think we were able to mitigate that a little bit by buying fertilizer early (last year). I don't think farmers can avoid it in 2023 unless fertilizer prices take a big dip down," he said.

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

Follow her on Twitter at @KatieD_DTN

Katie Dehlinger