USDA Report Finds Farmers Will Only See a Slight Decrease in Farm Income

Thursday, December 5th, 2024 -- 8:01 AM

(Hope Kirwan, Wisconsin Public Radio) At the start of 2024, federal agricultural economists were forecasting a tough year for American farmers. 

According to Hope Kirwan with Wisconsin Public Radio, a report from the U.S. Department of Agriculture in February projected a 25 percent decline in net farm income from 2023. Now, the USDA expects farmers will only see a 4 percent decline for the year, keeping net farm income well above the 20-year average.

Carrie Litkowski, senior economist with USDA’s Economic Research Service, said lower-than-expected costs for expenses like livestock feed and crop fertilizer improved farm income projections throughout the year.

“Each (forecast) release, they got a little bit lower which helps farm income,” Litkowski said during an online presentation Tuesday. “That’s just reflecting the new data as it comes in, particularly the prices that farmers were actually having to pay for their inputs being a little bit lower.”

Litkowski said the USDA’s initial expense forecast in February is based on trends from previous years. Farmers saw significant cost increases in 2021 and 2022 due to inflation. But 2024 represented a nearly 2 percent decline in expenses, with the largest declines in feed, fertilizer and pesticides.

Aaron Tigert, vice president of ag lending and insurance for Compeer Financial, said lower fuel prices this year also helped lower costs for the Wisconsin farms he works with.

Tigert said labor costs have remained high for most producers. But the expense that has impacted farms the most in 2024 is higher interest rates, affecting annual operating loans and bigger decisions around farm expansions.

“It used to be a fairly (trivial) line item expense if you were borrowing operating capital,” he said. “Now, with the going operating rates, it could be as much as 10 percent of your total cost of production for an acre of corn or soybeans. So it’s now become material.”

Tigert said he’s telling farmers to expect interest rates to remain the same heading into 2025. While leaders at the Federal Reserve Bank have moved toward rate cuts, he said the change doesn’t always equate to lower borrowing rates for producers.

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