USDA Forecasts Farm Sector Profits to Remain Above Average in 2022

When adjusted for inflation, 2022 net cash farm income is forecast to increase by $13.5 billion (8.7%) from 2021 and be at its highest level since 2012.

USDA released its latest farm sector profit forecast on Thursday. According it's estimates, farmers may fare better than previous years in many 2022 balance sheet boxes.

Net Farm Income

Net income, a broad measure of profits, is forecast by USDA at $147.7 billion in calendar year 2022, an increase of $7.3 billion (5.2%) in 2022 relative to 2021.

The 2021 value is an increase of $45.9 billion (48.5%) relative to 2020. When prior years are adjusted for inflation, net farm income in 2021 was at its highest level since 2013.

Net farm income in 2022 would be $0.9 billion (0.6%) lower than in 2021 yet 42.1% above its 20-year average (2002–21) of $104.0 billion in inflation-adjusted dollars.

Net Cash Farm Income

USDA forecasts $168.5 billion in 2022, an increase of $22.1 billion (15.1%) relative to 2021. The 2021 value was $29.6 billion (25.4%) above 2020.

When adjusted for inflation, 2022 net cash farm income is forecast to increase by $13.5 billion (8.7%) from 2021 and be at its highest level since 2012.

Net cash farm income in 2022 would be 34.5% above its 2002–21 average of $125.3 billion. Net cash farm income encompasses cash receipts from farming as well as farm-related income (including government payments) minus cash expenses.

It does not include noncash items — including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings — reflected in the net farm income measure above.

Cash Receipts

From the sale of agricultural commodities, USDA forecasts cash receipts to increase by $91.7 billion (21.2%, in nominal terms) from 2021 levels to $525.3 billion in 2022.

Total crop receipts are expected to increase by $36.4 billion (15.3%) from their 2021 level following higher receipts for soybeans, corn, and wheat. Total animal/animal product receipts are expected to increase even more from the previous year, by $55.3 billion (28.3%), following increases in receipts for all categories of animal/animal products.

These increases would put total cash receipts in 2022 at their highest level on record, even after adjusting prior years for inflation.

Government Payments

While cash receipts overall are expected to increase in 2022, lower direct government payments and higher production expenses are expected to moderate income growth.

Direct government payments are forecast to fall by $12.8 billion (49.7%) from 2021 to $13.0 billion in 2022. The decrease is expected largely because of lower supplemental and ad hoc disaster assistance for COVID-19 relief in 2022 compared with 2021.

Total Production Expenses

This number, including operator dwelling expenses, are forecast to increase by $66.2 billion (17.8%) to $437.3 billion (in nominal terms) in 2022.

Spending on all categories of expenses is expected to rise with the largest increase in fertilizer-lime-soil conditioner expenditures, up 44%.

Average Net Cash Farm Income

USDA forecasts farm businesses to fall 3.3% from 2021 to $98,200 per farm in 2022 (in nominal terms). However, the regional average net cash farm income outlook is mixed.

For farm businesses located in the Northern Crescent region, average net cash farm income is forecast to increase in 2022, but it is forecast to decline for farm businesses in all other regions when adjusted for inflation.

Farm businesses specializing in dairy are expected to see the largest growth in average net cash farm income in 2022, while those specializing in wheat, cotton, and specialty crops are expected to see the largest declines in 2022.

Farm Sector Equity

Ag equity is expected to increase by $315.6 billion (10.4%) in 2022 to $3.34 trillion in nominal terms.

Farm sector assets are forecast to increase $337.5 billion (9.7%) in 2022 to $3.84 trillion following expected increases in the value of farm real estate assets.

Farm sector debt is forecast to increase by $21.9 billion (4.6%) in 2022 to $496.0 billion in nominal terms but it is forecast to fall by 1.2% when adjusted for inflation.

Debt-to-asset levels for the sector are forecast to improve from 13.56% in 2021 to 12.93% in 2022.

Working capital, which measures the amount of cash available to fund operating expenses after paying off debt due within 12 months, is forecast to fall by 2.6% in 2022.

For more details, visit USDA's site.