This is according to a forecast released by the USDA’s Economic Research Service (ERS), which is informed by various financial performance measures such as receipts and expenses, gross and net value added, and net cash income, as well as changes to assets, wealth and financial ratios.
Net farmer income for all farm sectors is predicted to decline by US$30.5bn (18.2%), while net cash income is expected to fall by US$44.7bn (almost 23%) relative to last year. Both estimates are inflation-adjusted. The ERS notes that even if the negative forecasts are realized, both measures would stay above 2020 levels and above the 2002-2021 average. The downward trend will be mostly driven by lower prices.
And there is a perfect storm facing dairy farmers, according to the projections.
The ERS estimates that milk receipts will fall by 14.6% or US$8.4bn, a decline only surpassed by chicken egg receipts (-24%). The decline in milk prices means that dairy farmers are likely to see an increase in support through the Dairy Margin Coverage Program (DMC), which is forecast to make US$285m in payments in 2023 – up US$156.7m, or 122.2%. Enrollment for the program closed on January 31, 2023.
Besides the DMC, other direct government payments are likely to be reduced this year, including from the Emergency Relief Program (ERP) and the Emergency Livestock Relief Program (ELRP). Ad-hoc assistance including farm bill-designated disaster programs, are expected to pay out US$6.1bn less in 2023, largely due to declining ERP payments.
The decline in government payments and milk receipts means that dairies are forecast to experience the largest dollar decline in average net cash farm income (NCFI) from all farm businesses that specialize in animals or animal products. Average NCFI is projected to be $408,900 in 2023, down US$258,200 (-39%). Regionally, farm businesses in the Fruitful Rim are forecast to see the largest dollar decrease (US$46,700) while those in the Northern Crescent could experience the largest percentage decrease in average NCFI at 29.9% ($28,200) per farm. For both regions, farms are forecast to see higher production expenses and lower cash receipts in 2023.
In terms of expenses, feed is expected to decline from US$76.5bn to US$72.6bn, as is fertilizer (US$42.1bn versus US$42.4bn, but still way above the 2021 value of US$29.5bn). Fuel and oils are projected to fall to US$17bn, down from US$20.1bn, while electricity could rise slightly to US$7.2bn, up from US$7.03bn. Production expenses, including those associated with operator dwellings, are forecast to increase by US$18.2 billion to US$459.5bn.
