Largest Decline in U.S. Farm Income
USDA and farm economists are predicting lower prices for many important farm commodities from corn to cattle, milk and even eggs in this new year.While these lower prices may be bad news for farmers, it could help decrease inflationary prices at the grocery store for consumers.
On February 7 the USDA reported that US farm sector income is forecast to continue to fall in 2024 after reaching record highs in 2022. Net farm income, a broad measure of profits, reached $185.5 billion in 2022 After decreasing by $29.7 billion (16.0 percent) from 2022 to a forecast $155.9 billion in 2023, net farm income in 2024 is forecast to decrease further from the 2023 level by $39.8 billion (25.5 percent) to $116.1 billion. That would be a two-year decline of around 40% in farm profits although farm income climbed to highest level in history in 2022.Farm income was $94 billion in 2020 and 2022 at $185 billion was highest ever and double that 2020 number. So volatility is the by-word.
In 2024, corn receipts are expected to fall by $11.3 billion (14.3 percent), as lower forecasted prices should outweigh higher quantities sold in 2024.
A year ago corn was trading near $700 a bushel – but as of February 12,2024 the key food and feed commodity is down to $429 and according to forecasters,expected to continue this downward price trend.
Here is the outlook from market watcher Trading Economics.
Outlook for corn? Heading lower
Corn decreased 41.73 USd/BU or 8.85% since the beginning of 2024, according to trading on a contract that tracks the benchmark market for this commodity.
Corn is expected to trade at 418.70 USd/BU by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, they estimate it to trade at 385.47 in 12 months time.
Most of the US corn crop is used domestically as the main energy ingredient in livestock feed, and for fuel ethanol production mixed with gasoline at your local fueling station.Corn is also processed into a multitude of food and industrial products including starch, sweeteners, corn oil, and beverage and industrial alcohols.
Most other grains are also expected to fall this year says this month’s USDA report.
Lower prices in 2024 should also outweigh growth in quantities sold for soybean receipts, which are forecast to decrease by $6.0 billion (10.3 percent). Cotton receipts are projected to increase by $0.1 billion (1.6 percent) due to higher quantities sold. Wheat receipts are forecast to decrease $0.1 billion (0.5 percent), as lower prices will outweigh higher quantities sold.
Receipts for hay are projected to fall by $0.8 billion (8.3 percent).
Vegetable and melon cash receipts are expected to fall $30 million (0.1 percent) in 2024 while receipts for fruits and nuts are expected to increase $0.8 billion (2.8 percent) during the year.
Total animal/animal product receipts are projected to decrease by $4.6 billion (1.9 percent) to $239.8 billion in 2024. Receipts for eggs, turkeys, cattle/calves and milk are forecast to fall relative to 2023.
While receipts for most major animal/animal products are projected to fall, receipts for hogs and broilers are expected to remain relatively unchanged.
Still profits in the pork industry are down says a story in the Wall St Journal the month.”We’re Not Eating Enough Bacon, and That’s a Problem for the Economy.” Farmers lost an average of $30 a pig last year according to estimates from Iowa State University “the American pork industry has a problem: it makes more tenderloin, ham, sausage, and bacon than anybody wants to eat. “
From giant processors to the farmers who supply them, they are in a predicament largely of their own making. They made production so efficient that demand can’t keep up with supply.”
Lower milk receipts
USDA also has bad news for dairymen too.Milk receipts are expected to decrease $0.9 billion (2.0 percent) in 2024 due to lower prices.
Cash receipts from cattle and calves are expected to decrease $1.6 billion (1.6 percent), as falling quantities sold should outpace growth in prices.
Turkey prices set to fall
Broiler receipts are expected to increase $0.7 billion (1.6 percent) in 2024, due to higher prices and quantities sold. This nominal increase is a decrease in real terms. Falling prices should drive receipts for turkeys $1.4 billion (21.0 percent) lower during the year.
Lower egg prices too
Cash receipts for chicken eggs are expected to decrease $1.7 billion (12.0 percent) in 2024, also due to a lower price forecast. California egg prices are dropping right now, following the trend line seen last year going into spring.
Inflation preview
We got a preview this week with release of January inflation data.For a while food prices increased by more than 10% a year but now prices for food purchased at grocery stores is about 1.2% higher than a year ago. Food purchased at restaurants is 5.1% more expensive than this time in 2023.
Some common grocery staples – milk, coffee, seafood and butter were cheaper this January compared to last January.
Energy costs also were 4.6% less to start 2024 than at the start of 2023 and gasoline is 6.6% cheaper than a year ago.
A Congressional report suggested legislators must work on a new Farm Bill to help the ag economy highlighting the volatility inherent in income and high production costs. They noted that the potential decline in income in 2024 may be the largest on record in nominal terms, and third largest all time when adjusted for inflation.