The agricultural sector is bracing for a downturn in profitability in 2024, with forecasts predicting a significant decline in both net farm income and net cash farm income, according to recent data from the U.S. Department of Agriculture (USDA).
Net farm income, a comprehensive measure of agricultural profits, is projected to fall to $140.0 billion in 2024, a decrease of $6.5 billion or 4.4% from 2023 in nominal dollars. After adjusting for inflation, this represents a drop of $10.2 billion or 6.8%. Despite the anticipated decrease, net farm income in 2024 would still be 15.2% above its 20-year average of $121.5 billion but remains 27.6% below the record high achieved in 2022.
Net cash farm income, which includes cash receipts from farming and related sources minus cash expenses, is forecast to decline to $154.1 billion in 2024. This is a reduction of $12.0 billion or 7.2% compared to 2023 in nominal terms. Adjusted for inflation, net cash farm income is expected to decrease by $16.3 billion or 9.6%. While this figure is 6.2% above the 20-year average of $145.1 billion, it falls 31.0% short of the record high set in 2022.
The forecasted decline in farm sector profits is influenced by several factors. Cash receipts from agricultural commodities are expected to drop by $9.8 billion, or 1.9%, to $516.5 billion in 2024. A significant decrease in crop receipts, particularly for corn and soybeans, is anticipated, with total crop receipts expected to fall by $27.7 billion or 10.0%. Conversely, receipts from animal and animal products are projected to increase by $17.8 billion or 7.1%, driven by higher returns from eggs, cattle, milk, and broilers.
Direct government payments to farmers are forecast to decline by $1.8 billion or 15.1%, reaching $10.4 billion in 2024. This reduction is largely due to anticipated decreases in Dairy Margin Coverage Program payments and other disaster assistance. Total production expenses are expected to decrease by $4.4 billion, or 1.0%, to $457.5 billion, with the largest declines in feed, fertilizer, and pesticide expenses.
The average net cash farm income per farm business is forecast to fall by 8.9% to $106,200 in 2024. This decline will impact six out of nine USDA Economic Research Service Farm Resource Regions, with the Heartland region anticipated to experience the steepest drop. Crop-specializing farms are projected to see lower average net cash income, while farms specializing in animal products are expected to see an increase. Wheat farms are predicted to face the largest percentage decline, while dairy farms are forecast to see the most significant percentage increase.
Despite the anticipated reduction in farm profits, the farm sector's equity is expected to rise by 5.3% to $3.68 trillion, driven by increases in the value of farm real estate assets. However, farm sector debt is forecast to increase by 4.2% to $540.8 billion, leading to a slight improvement in the debt-to-asset ratio from 12.93% in 2023 to 12.81% in 2024.
For farm households, median total income is projected to increase to $99,683 in 2024, a nominal rise of 1.7% from 2023. After adjusting for inflation, this represents a decrease of 0.7%. Median farm income is expected to improve slightly from -$900 in 2023 to -$834 in 2024, while median off-farm income is forecast to rise by 3.6% to $82,796.
The outlook for 2024 reflects ongoing challenges for the agricultural sector, with significant declines in both farm income measures amid shifting commodity prices and government payment reductions.
