February 14, 2024

USDA Farm Income Forecast, February 2024 Update

Join host Brady Brewer for a Purdue Commercial AgCast episode with Purdue ag economist Michael Langemeier as they discuss USDA’s latest farm income forecast for February 2024. Net farm income is expected to decline by 25% but remain near the long-run average. Gain insight into various crop and livestock sectors as they discuss enterprise revenues, farm household income, production expenses, breakeven prices for an Indiana case farm, and the U.S. farm sector balance sheet.

Companion slides and the audio transcript can be found below.

Audio Transcript:

Brady Brewer: Hi, and welcome to the Purdue Commercial Agcast, the Purdue University Center for Commercial Agriculture’s podcast featuring farm management news and information. I’m your host, Brady Brewer, and joining me today is Dr. Michael Langemeier, Professor of Agricultural Economics here at Purdue University and the Associate Director of the Center for Commercial Agriculture.

On today’s episode, we will be discussing the most recent release of the USDA farm income forecast, which was here in February of 2024. Michael, welcome to the podcast. Jumping right in, the USDA released their latest farm income numbers. They do this several times throughout the year. They do it in early fall, then they do their late fall update in November. And then the February forecast, which is the one where they release the official estimates for the previous year. So in this case, it would be for the 2023 crop year, but this is also the first glimpse of what they’re expecting for this upcoming growing season.

[00:01:06] USDA Farm Income Forecast for February 2024

Brady Brewer: Right now it’s February, 2024. This is their first official forecast for what farm income will be for the 2024 growing season. From the numbers we see that net farm income is down, they’re expecting to be down here in 2024, in particular, if you put numbers to it, it’s about a 25 and a half percent decline in farm income in 2024 relative to the last growing season in 2023. If we look at this from a historical perspective, if we think about the last two decades, in 2023, when I did outlook talks, I always told people we’re down, but we’re still above the historical average. We can’t say that anymore. We are now below the two decade average, barely, but we are below the, the two decade average.

Michael Langemeier: Yeah, it’s, it’s right about it at the average, and it just tells us how good incomes really were in ’22, ’23, and ’24. I mean, we were down substantially from last year, but we’re down like 60 billion from 2022. So very sharp declines, but given the fact that we’re still about average, it’s still a good sign.

Brady Brewer: I would definitely agree. So, getting into the numbers, net farm income is down 25.5% from 2023 to 2024. The official estimate for net farm income is right at $116 billion dollars. Gross cash farm income is only down 4 .1%. If you will look at some of the other items of note, and we’ll get into these and, and go into detail throughout this podcast here in just a minute. But expenses are up 3.8%. Expenses are tracking right along with what the general macro economy is doing and overall inflation across the board. So that’s the average what they’re expecting, but they do release a range of what they expect. So tell me a little bit about what the range we can expect for net farm income.

Michael Langemeier: Actually, I created this range and what I did is I took the average U.S. net farm income in real dollars from 2007 to 2024. And then I added a standard deviation and I subtracted the standard deviation. And what I was trying to do here is look for really low years and really high years. 2009 and 2016 were on the low end, so extremely low. 2024 is about average, but we’re coming off of, like I said, three years that were above one standard deviation above the long run average. So, ’21, ’22, and ’23, were certainly outliers on the high side. And so, I wasn’t all that surprised to see a rather large adjustment in ’24. We’re going to dig under the hood and look at some different cash receipts for different commodities. But you take corn and, and oil seeds, for example, or feed grains and oil seeds, for example, and the cash receipts are down substantially. Uh, just looking at corn price on the WASDE report, for example, corn price in this marketing year compared to last marketing year is down 25%. Given that we have some very large decreases in some of the crops, it wasn’t that surprising to see the drop in ’24. And it’s very important just to point out, because I’ve seen a lot of headlines that emphasize this large drop. It’s very important to point out is we’re just back to the long run average. That’s not good necessarily, but it’s not as bad as what we had in 2015 through 2019.

Brady Brewer: Yeah, so really back to the long run average. So that down 25 and a half percent may seem like a little doom and gloom, but I do agree. We’re, we’re right there at that long term average. And I do want to point out in preparation for this podcast, as I was pulling some of the data, one of the things that the USDA releases, and they made a point to release this because I think of, of some of the volatility we’ve been having over the past couple of years. Last year, they were actually predicting net farm income at this time, so February 2023, to be around 105 billion dollars. That was a huge drop and there was huge revisions in the forecast. So I do want to remind everyone, we’re talking about the USDA’s forecast here.

So it’s currently in February. If we think about some of the harvests that are yet to happen as we get into spring, wheat harvest happening, spring and summer, and then some of your summer crops happening, your vegetable crops, there’s a lot left. Like a lot of wild cards that could change this forecast. So what happened in 2023, they were predicting even bigger drops to farm income than what we’re seeing now. And then when they got to the early fall farm income forecast, they revised it upward. So they went from below trend to fairly significantly above trend. It was still a decline from 2022, but we saw some pretty big revisions in the the farm income forecast in 2023. In most years, the forecast that they release in in February is within about 10 percentage points of what it ends up being at at the next year when they release the official numbers. Last year, they were over 20 percentage points off. There was some big wild cards in there that happened throughout 2023. Price rebounds, quantity rebounds, and stuff like that, that actually they had to revise those numbers up when we got to fall. So just want to remind everyone we’re talking about a forecast here and they and we do get it wrong because we’re a year out and sometimes it’s a little hard to predict some of it. So I just want to throw in that caveat.

All right. So the next thing, you know, so we’re talking about net farm income, but if we put this on a per basis, we think about return on farm assets, either through capital gains or current income, we can decompose this into these two measures.

Michael Langemeier: And really with the current income return and the capital gain return in ’24 is expected to be right around the average. And so again, it’s more of an average year rather than a very low income year. As we’ve seen the last three or four years, the capital gain income is expected to be higher than the current income. And so what that means is USDA is expecting land prices to continue to increase.

Brady Brewer: Yeah, so it’s the asset portion of the balance sheet. So land is the big driver of it but there’s also some machinery in there as well and some other assets that are driving that returns to the capital gains.

[00:07:19] Indiana Case Farm Income Forecast

Brady Brewer: Michael, we’ve been talking about the USDA farm income, but you also do a west central Indiana case farm. Let’s get to some Indiana specific numbers.

Michael Langemeier: Here, the numbers are down substantially more than the U.S. net farm income, and again, I’ll revise these. This is really early in ’24, as you indicated, but I’m expecting a large drop in ’23. I don’t have a final number for ’23 yet, and in fact, the USDA ERS number is a projected number, a forecasted number for ’23 still too, and so is mine. So I’m expecting a large drop from about $225 net farm income per acre for a corn/soybean farm, down to about $60 per acre, so a very large drop in ’23. Then I’m expecting another $100 drop from ’23 to ’24.

The reason why I think it’s important to talk about this is the U.S. net farm income forecast, we need to remember, this is all commodities in the U.S. and livestock. When you start looking at specifically feed grains and oil seeds, it’s a lot less, it’s a lot more bearish, a lot bigger drop when you’re looking at those commodities compared to all commodities. One of the things we are going to talk about is how different receipts change, but I just want to point out one of those, for example, beef receipts are not expected to drop hardly at all. In fact, they might increase, cause we got very low inventories right now and so they’re expecting some pretty high beef prices, both at the farm level and also in the grocery store. That’s just one example of a very important enterprise that’s not expected to see a drop. So when you put all that together, you’re looking at the 25 percent drop, but it is larger for some commodities.

Brady Brewer: Yeah, definitely sector specific impacts here. Michael, when we look at the long term trends, we’re right about average, so one thing that you did is you kind of decomposed and looked at the U. S. net farm income from a historical perspective.

Michael Langemeier: Yeah. When you go back in and look at the U S agriculture, there’s really two time periods since 1973. 1973 to about 2007, was really the opening up of trade, and it’s prior to ethanol. In 2007, I usually refer to that in my presentations, as the ethanol boom. That’s when ethanol really started to increase and plateau even a little past 2007, and give us the current industry that we see today. The point of doing this particular exercise, looking at these two time periods is the average real net farm income since 2007 is considerably higher than the real net farm income from 1973 to 2007. So we’re still living in that ethanol boom and getting a positive impact because of that. That’s no surprise for those in the industry because 35 to 40 percent of the corn product goes to ethanol.

[00:10:04] Farm Income – Receipts & Revenues

Brady Brewer: So let’s decompose this into receipts and revenues for each of those specific sectors and what’s driving some of the changes in revenues. And then after that, we’ll decompose it into expenses. And then after we get on with expenses, we’ll talk a little bit about more balance sheet specific items.

So when we look at U. S. farm sector cash receipts, we see that for both animals and crops, we see fairly specific or fairly substantial decreases in what the USDA is expecting in 2024 in terms of cash receipts.

One thing that the USDA does is they decompose these cash receipts into what’s driving either the increase or the decrease from one year to the next. The vast majority of this change or this decline that they are expecting is coming from changes in commodity prices. There is some positive influences on cash receipts. They are expecting slightly higher yields in both livestock and crops. And then there’s some other changes in there. So you can think of this as being the government payments, maybe conservation payments, that go into farm income as well. But overall, the biggest driver here of what’s causing their expectation for lower cash receipts in agriculture is due to commodity price declines.

And here’s where I want to say, there’s a lot of wild cards out there. This is where we saw the big swings last year in their expectation of farm income. If you think about some of the trade disruptions out there, some of the wars, that’s just disrupting demand out there. There’s a lot of wild cards out there that could put some upward pressure on commodity prices if they were to happen. Now with that said, ending stocks, and I know, Michael, you and Jim cover this when you guys do more outlook type stuff, but ending stocks to use ratios are up in 2024 relative to where they were last year at this time. On the soybean side, we’re expecting higher plantings. Corn plantings are expected to be a little bit down here in 2024. So that could put some upward pressure on it. But overall, we’re seeing a little bit higher stocks to use, which tends to put a ceiling on where we can expect commodity prices to go. But there aren’t a lot of wildcards out there.

Michael Langemeier: It’s not only price changes that could impact the forecast as we move ahead. August would be the next value for 2024, in terms of our forecast value. Also when you’re putting together an estimate like this, they assume trend yields. They assume that livestock disease is gonna have the same death loss it has had historically. And we know that, that that can vary tremendously. And so just keep that in mind when you’re looking at the forecast.

Brady Brewer: So corn in 2023 was right at 78 billion dollars in cash receipts or gross revenues for the agricultural sector. That’s expected to decline about 9 billion dollars down to about 67 billion dollars. Soybeans was up 57 billion dollars in 2023. That’s expected to decline about 6 billion dollars down to 51. 7. The fruit and nuts category is actually up slightly. Vegetables and melons is status quo. So no change there. Wheat is down about 100 million dollars. Not much change to the wheat category. And then cotton is up slightly.

And I think, Michael, this is what you were alluding to earlier with your case farm. Really, when we look at the crops cash receipts. So corn, soybeans, fruits and nuts, vegetables and melons, wheat, and then cotton, corn and soybeans are really the big movers here.

When we look at the livestock side, cattle and calves is pretty status quo. It’s down marginally, so not much change there. Dairy products and milk is again, pretty status quo, down slightly, but it’s a pretty minimal decline that they’re expecting. Broilers are up slightly. Hogs are up and then eggs are down a little bit. So not too many big movers on the livestock side.

Michael Langemeier: Yeah, and it’s not very good news for the swine industry because 2023 was not a good year to say the least. And USDA, at least in their forecast, is expecting the cash receipts to only be up slightly. We’re still down considerably from where they were in 2022. I think that’s one that that’s particularly noteworthy.

Also, if you look at the cattle and calves, we were up sharply in ’23 compared to ’22, and expected to drop off a little bit in ’24. But I think that drop off reflects the lower inventories. As I said, the price is going to be really strong here in ’24.

Brady Brewer: Yeah. And I’ve seen some articles out there that I think the low inventories are expected to continue for a little while.

Michael Langemeier: It takes a long time to increase those inventories again, because it’s a long cycle compared to broilers or hogs where you can turn that around pretty quickly.

Brady Brewer: I’m thinking of an article I saw yesterday, and this is more on the dairy side, but I think it applies for the beef sector as well, where heifer inventory is down, which obviously if heifer inventory is down, that limits your ability to increase inventories in the near and long term. So it’s going to be an upward battle here some beef categories.

Michael Langemeier: And think about how tough a decision that is, Brady. I mean, here you got a heifer that’s worth a lot of money because the market price is really good and the price for bred heifers is pretty good because, because of where we’re at in the price cycle here. At the same time, you know, that if you keep that heifer, you may be able to garner some higher income here, but it’s longer term. Though that income spread over many years. And so that’s a very tough decision.

[00:15:35] USDA Farm Household Income

Brady Brewer: The last thing we’ll talk about when it comes to revenue is the USDA does include their forecast for total farm household income. And they are expecting marginal, if not slightly higher, total income at the household level. Now, this is partly due to the fact of they’re not forecasting any decrease in farm living expenses. Even though farm incomes may be down, farm living expenses aren’t going down. And then they are forecasting slightly higher off farm incomes, and I think this tracks with what inflation has been doing. Wages are increasing, and wages tend to maybe lag a little bit of overall inflation, so the USDA is expecting off farm wages to continue coming up.

Michael Langemeier: Brady, this is more from a median perspective, so kind of right at the 50 percentile. I think if we would look at larger farms, the drop would be more significant because the larger farms would have more of their income coming from the farm. It makes sense if you think about it, smaller or mid sized farms are getting income from off farm income, so they’re not going to be impacted as much as the larger farm that are getting most of their income from the farm. But from a median standpoint, you’re right. I mean, it’s pretty flat incomes.

Brady Brewer: I think the median total farm household income doesn’t tell the complete story. There’s some definitely some heterogeneous impacts here depending on the size of farm and how many people in the household are working off

Michael Langemeier: It’s another way of looking at it.

Brady Brewer: Yep. All right.

[00:16:58] Farm Production Expenses

Brady Brewer: So let’s move on to expenses. So no surprise here with inflation increasing. Inflation adjusted production expenses are up slightly from 2023. You know, I’m keen to point out here, we’re still below when we adjust for inflation, what farm expenses were back in the 2011-2012 timeframe, however, I’m always reminded by farmers, this is going to be the most expensive crop they put in the ground here in 2024, from a nominal perspective. But inflation adjusted, we are still below 2011-2012 production numbers.

Michael Langemeier: And I think just like the receipts, I think the expenses is something that they, they could modify as we move through the year. I was actually a little surprised, Brady, that they were expecting a 3.8 percent increase. If you look at the USDA ag price indices, they’re flat to slightly down on a year to year basis. And so I’d have to dig under the hood a little bit, to see why they got a 3.8%. But I’m not necessarily arguing with their number. I’m just saying that there could easily be an adjustment.

Brady Brewer: Yeah, and this is just like

Michael Langemeier: Because there was last year.

Brady Brewer: Yep. And I want to remind everyone just like for the cash revenues, we have to keep in mind that the overall average number, doesn’t necessarily apply to all sectors. Same is true here. On the fruit and vegetable side, as wages tend to increase they’re going to see,

Michael Langemeier: Wages are definitely up.

Brady Brewer: Yes. So those areas of agriculture that employ more labor may be seeing a little bit higher increase.

Michael Langemeier: And also probably services, because a lot of services provided to farms are labor intensive. And so those, those type of inputs will also increase.

Brady Brewer: So let’s just go through what they’re expecting, the different expense categories. So obviously with some of what’s going on in the crop side, they’re expecting feed purchase expenses to be up slightly. Labor is probably one of the biggest movers here. They’re expecting labor expenses to increase. Fertilizer expenses they are expecting to increase there, and I suspect there’s some quantity applied issues going into that as well. Livestock, poultry purchases are up. Seed purchases are up. Interest costs expenses are flat, and I think this is coming from what we’re expecting the Federal Reserve to do on interest. We’re probably at the top range of where the Fed funds rate is going. The FOMC committee expects the Fed funds rate to remain flat. If not, decline slightly in 2024, so no surprise that expense is going to remain flat. Pesticides is up slightly from 2023. And then property taxes and fees is up slightly as well. If we look at fuel and oil, they are down slightly from 2023, as well as net rent is down slightly, if not even from where it was in 2023.

Michael, one of the things you do is you turn these revenue and expense projections for your west central Indiana case farm and you do some break even prices. So what’s going on with the, these break prices?

[00:19:59] Indiana Breakeven Prices

Michael Langemeier: Here we want to focus specifically on corn, but I’ll talk a little bit about soybeans too. We said that the expenses were up 3. 8%, and again, that’s aggregates, all crop and livestock commodities are included in that. When you actually look at corn, as I indicated, the price is down substantially, but the break even price is also down about ten percent. That’s primarily due to lower fertilizer costs. We’ve taken about a hundred dollars per acre off of rotation corn fertilizer costs in two years. About fifty last year and fifty dollars this year. That’s really helped the break evens, but the problem here, of course, is the break evens are still above, in some cases, well above, depending on the productivity of land, you’re looking at well above the expected price. So that’s why we’re expecting some pretty low net income for corn. And the story is similar for soybeans, just not quite as negative. Right now the soybean to corn price ratio is above the long run average. And so soybeans look a little more profitable, at least in the Eastern Corn Belt, than corn.

Brady Brewer: For low productivity land, you have break even price for corn being right at $5.61. For average productivity land, you have the break even being $5.28. And for high productivity land, you have the break even price being right at $4.90.

Michael Langemeier: And if you adjust for basis, you’re looking at a cash price in the fall of about $4.60. So all of those are quite a bit above the expected price.

Brady Brewer: That is revenue and expenses.

[00:21:20] Balance Sheet

Brady Brewer: Let’s move to the other financial statement. The balance sheet. Michael, what does USDA say is going to happen to the

Michael Langemeier: sheet we do this fairly quick because in summary, the balance sheet is still really strong. Particularly on the non current side. Real estate to be the major asset. In fact, I always say it’s about 80 percent of all assets in the balance sheet, that’s increased to 84 percent with this new estimate in 2024. Obviously, what happens to land really dictates how the balance sheet looks. Land prices, as we indicated before, are relatively high now and expected to increase a little bit more in ’24. And so that makes the equity situation very, very solid. The debt to asset ratio is only 12.8%, in aggregate. As I’ve said before on these podcasts, if you looked at commercial farms, that would be closer to 25 to 30 percent, but there’s a lot of people that are semi retired, part time farms that have no debt. They’re all included in this balance sheet, but the balance sheet is really strong.

Brady Brewer: Yeah, overall the U. S. balance sheet is really strong. Working capital is strong as well.

Michael Langemeier: Strong equity.

Brady Brewer: The balance sheet is strong for agriculture right now. Though I do want to say the numbers that we are talking about are for the U.S. farm sector as a whole. So when we say 84 percent of the U.S. farm sector balance sheet is land, that’s not meaning the average farmer 84 percent is land. That’s the U.S. farm sector balance sheet. But with that said there’s going to be core correlation there. Farmland is the majority of any farmer’s balance sheet. Maybe there’s some farmers out there that rent a majority of their land and it may look a little bit different where you have machinery and buildings being the largest portion, but for the average farmer out there land is the biggest line item on their balance sheet.

So when we look at, asset and debt values, we see rising asset values. Debt is rising as well, but not as assets.

Michael Langemeier: Yeah, assets are rising faster. So the equity continues to rise in production agriculture. And it’s particularly prevalent since 2007.

Brady Brewer: Yeah, when we look at just debt, we have surpassed the 500 billion dollar mark, right in the 550 range, but again, it’s not increasing as fast.

Michael Langemeier: It supported by a lot of equity. And real estate debt has climbed faster than operating debt. Operating debt has been relatively flat, up slightly in ’24 as expected, but we continue to see increases, in real estate debt. And part of that’s reflecting the fact that, you know, farmers are expanding. Some of the farmers are expanding and borrowing money to do that.

Brady Brewer: When we look at liquidity in agriculture, working capital remains strong. Liquidity is expected to decline a little bit in 2024. This is mainly being driven by the lower net farm income, but liquidity is still pretty strong out there, in the U.S. Farm sector. The current ratio being expected from the USDA is right at 1.88. This is down from 2.08 in 2023, but it’s still a pretty good number for the farm sector. Solvency remains relatively low. The USDA is expecting a debt to asset ratio of right around 12.8 percent for the farm sector.

In summary, the net farm income is expected to decline from 156 billion in 2023 down to 116 billion in 2024. This is a 25 and a half percentage decrease year over year. Net farm income in 2024 is still similar, though, to that long run average. So we’re just reverting back to long run trend. U. S. farm balance sheets remain strong. Working capital remains strong. It is declining, but it’s still in a strong position. And solvency remain strong as well. Break even prices for corn and soybeans are expected to decline in 2024 as well as net farm income per acre is expected to decrease in 2024 and expected to be well below the long run average from 2007.

Please visit us at the Purdue Center for Commercial Agriculture’s website at purdue.edu/commercialag. You can also find us on Twitter with the handle @PUcommercialag on behalf of the Center for Commercial Agriculture. Thank for listening.




USDA Farm Income Forecast, December Update

December 20, 2023

Curious about the outlook for farm incomes in the coming year? Join host Brady Brewer in this podcast episode with Purdue ag economist Michael Langemeier as they discuss farm income projections outlined in USDA’s December Farm Income Forecast. Michael shares producer perspectives from the Ag Economy Barometer and takes a closer look on an Indiana case farm.


USDA Farm Income Forecast, August Update

September 13, 2023

Join us in this Purdue Commercial AgCast episode as we dive into the latest USDA farm income forecast released in August 2023. Discover the factors behind a notable 23% drop in net farm income and gain insights into the impact on various commodities, from corn and soybeans to wheat, and even cow-calf operations.


Soybean Outlook Update Following USDA’s June WASDE Report

June 16, 2023

Soybean futures volatility increased sharply this week as futures prices responded to concerns about dry weather possibly impacting crop yields. Purdue ag economists James Mintert and Nathanael Thompson discussed the updated soybean outlook on the latest Purdue Commercial AgCast video podcast.



We are taking a short break, but please plan to join us at one of our future programs that is a little farther in the future.