Farm EconomyCONSIDERATIONS

Net farm incomes are expected to drop in 2023 as compared to the highs of 2022 but should still be above average. The USDA Economic Research Service (ERS) forecasts Average Net Cash Farm Income (NCFI) to be down 17.7% in 2023. The decline spans all types and sizes of farms. No farm sector is expected to increase NCFI in 2023. The livestock sector is forecasted to see the greatest declines, with dairy leading the group with a forecast drop of 39%.11

Current drought conditions in the mid and western U.S. are expected to improve, but at a slow pace, and may impact forecasted cropping acres.

The industry is being impacted by poor supply chain elasticity, particularly with farm equipment. The days of ordering new equipment and having it available are gone. This ripples into the used equipment market and will tighten the ability of producers to invest in equipment and replace equipment in a timely manner. https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/highlights-from-the-farm-income-forecast/

Global conflicts continue to wreak havoc on grain and energy markets. Though the Black Sea Grain Initiative has been established, it has had little impact on moving grains at a substantial level. Energy costs, while down from highs last year, are still rippling through multiple input cost sectors for agricultural commodities.

While exports were strong in 2022, they are expected to soften in 2023. USDA ERS forecasts predict that ag exports may dip below imports this year, which does not follow the general historical trend as shown in Exhibit 7. China is forecasted to remain as the largest market for U.S. agricultural exports at $34.0 billion.12 There is concern that rising tensions with China could disrupt or further weaken realized exports.

11 Highlights from the February 2023 Farm Income Forecast.

12 Outlook for U.S. Agricultural Trade. https://www.ers.usda.gov/topics/international-markets-u-s-trade/u-s-agricultural-trade/ outlook-for-u-s-agricultural-trade/#:~:text=U.S.%20Agricultural%20Exports%20in%20Fiscal,Billion%3B%20Imports%20 at%20%24199.0%20Billion