Lower Costs, Stronger Milk Prices Lift 2024 U.S. Farm Income Outlook
Source: DairyNews.today
A challenging year for American farmers in 2024 is shaping up better than initially expected, as lower input costs and strong gains in livestock and dairy revenue offset weaker crop prices.
The U.S. Department of Agriculture (USDA) had forecast a sharp 25% drop in net farm income for the year, but revised projections now anticipate just a 4% decline, keeping net income above the 20-year average.
Expense Relief Aids Farmers
Carrie Litkowski, a senior economist at the USDA’s Economic Research Service, attributed the improved outlook to a nearly 2% reduction in farm expenses, driven by lower costs for livestock feed, fertilizers, and pesticides.
“Each forecast revision reflected updated data showing farmers paid less for inputs than originally expected,” Litkowski explained during a presentation.
Inflationary pressures fr om 2021 and 2022 had significantly increased farm costs, but 2024 brought much-needed relief. Aaron Tigert, vice president of ag lending at Compeer Financial, noted that lower fuel prices were a key factor for Wisconsin farms.
However, farmers are still contending with elevated labor costs and high interest rates. “Interest on operating loans has gone from a minor expense to as much as 10% of the total cost of production for an acre of corn or soybeans,” Tigert said. He advised farmers to prepare for steady rates heading into 2025, despite potential Federal Reserve rate cuts.
Livestock Gains Offset Crop Weakness
Total cash receipts for 2024 are forecast to decline less than 1% from 2023, thanks to strong income from livestock and dairy products. Livestock and animal product sales are projected to rise by over 8%, bolstered by a nearly 40% jump in egg revenue and a 12% increase in milk sales.
“Profits have returned to the dairy sector, with strong mailbox prices and a promising outlook for 2025,” Tigert said.
In contrast, crop income has struggled. Despite increased sales volumes, cash receipts from crops are expected to drop more than 9%, driven by lower prices. Weather conditions, particularly dry spells, have created disparities, with producers experiencing stronger yields faring better than those with lower harvests.
Uncertainty in 2025
Looking ahead, commodity prices are stabilizing, but key uncertainties remain. President-elect Donald Trump’s return to office raises questions about global trade policies, while ongoing negotiations over the farm bill could play a critical role in shaping financial outcomes for producers.
“There’s considerable unease about how trade dynamics and legislative decisions will impact agriculture,” Tigert observed.
To mitigate risks, he encouraged farmers to lock in costs for future expenses and use forward contracting to safeguard profits or lim it losses.
A Resilient Sector
Despite mixed conditions, 2024 has underscored the resilience of U.S. agriculture, with gains in some sectors counterbalancing setbacks in others. As the industry adapts to evolving economic and political landscapes, careful planning and prudent financial strategies will be key to sustaining growth.
Expense Relief Aids Farmers
Carrie Litkowski, a senior economist at the USDA’s Economic Research Service, attributed the improved outlook to a nearly 2% reduction in farm expenses, driven by lower costs for livestock feed, fertilizers, and pesticides.
“Each forecast revision reflected updated data showing farmers paid less for inputs than originally expected,” Litkowski explained during a presentation.
Inflationary pressures fr om 2021 and 2022 had significantly increased farm costs, but 2024 brought much-needed relief. Aaron Tigert, vice president of ag lending at Compeer Financial, noted that lower fuel prices were a key factor for Wisconsin farms.
However, farmers are still contending with elevated labor costs and high interest rates. “Interest on operating loans has gone from a minor expense to as much as 10% of the total cost of production for an acre of corn or soybeans,” Tigert said. He advised farmers to prepare for steady rates heading into 2025, despite potential Federal Reserve rate cuts.
Livestock Gains Offset Crop Weakness
Total cash receipts for 2024 are forecast to decline less than 1% from 2023, thanks to strong income from livestock and dairy products. Livestock and animal product sales are projected to rise by over 8%, bolstered by a nearly 40% jump in egg revenue and a 12% increase in milk sales.
“Profits have returned to the dairy sector, with strong mailbox prices and a promising outlook for 2025,” Tigert said.
In contrast, crop income has struggled. Despite increased sales volumes, cash receipts from crops are expected to drop more than 9%, driven by lower prices. Weather conditions, particularly dry spells, have created disparities, with producers experiencing stronger yields faring better than those with lower harvests.
Uncertainty in 2025
Looking ahead, commodity prices are stabilizing, but key uncertainties remain. President-elect Donald Trump’s return to office raises questions about global trade policies, while ongoing negotiations over the farm bill could play a critical role in shaping financial outcomes for producers.
“There’s considerable unease about how trade dynamics and legislative decisions will impact agriculture,” Tigert observed.
To mitigate risks, he encouraged farmers to lock in costs for future expenses and use forward contracting to safeguard profits or lim it losses.
A Resilient Sector
Despite mixed conditions, 2024 has underscored the resilience of U.S. agriculture, with gains in some sectors counterbalancing setbacks in others. As the industry adapts to evolving economic and political landscapes, careful planning and prudent financial strategies will be key to sustaining growth.
