By: Chris Zoller, Extension Educator -ANR in Tuscarawas County, Mike Estadt, Extension Educator- ANR in Pickaway County and David Marrison, Field Specialist -Farm Management
Forecast
U.S. net cash farm income (NCFI) is calculated by subtracting cash expenses from cash income, and the USDA Economic Research Service (USDA ERS) is predicting a decrease of $44.7 billion in 2023. If realized, this represents a 22.9 percent drop from the forecast record high of $195.3 billion in 2022. Net farm income (NFI) is a measure of farm profitability that includes changes in inventories, depreciation, and gross imputed rental income. USDA ERS projects NFI to decrease 18.2 percent or $30.5 billion in 2023. NFI reached $167.3 billion in 2022, the highest level since 1973 when adjusted for inflation. While NCFI and NFI are expected to decline when compared to 2022, both are forecast to remain above their 20-year averages in 2023.
Why the Decline?
USDA ERS bases these declines on three factors: (1) farm commodity prices are projected to drop seven percent in 2023 compared to 2022, (2) a 1.3 percent increase in production expenses, and (3) an anticipated 36.2 percent decline in direct Government payments.
After 2020’s record high of $45.6 billion (in nominal terms) of pandemic related payments, the trend of lower government payments will continue into 2023. Producers making their elections in the ARC-CO/ PLC program will have a very low likelihood of a payment in 2024. Government forecasted payments to farmers in 2023, estimated at 10.2 billion, will be the lowest since 2014 (non-adjusted for inflation)
Any Silver Lining?
Farmers that waited to buy fertilizer in 2023 instead of prepaying in the Fall, have been pleasantly rewarded as fertilizer prices have been in a downward trend since the beginning of the New Year. Farmers refusal to buy at 2022 price levels helped to create greater stocks of fertilizer in the world market. Improved river transportation issues and lower freight costs and downward movement in natural gas prices have brought the prices of commonly used fertilizers down by significant amounts.
Planning for 2023
Communication, planning, and budgeting continue to be critical as we move into 2023. Below we provide suggestions for you to consider.
- Do not rely on government farm programs as income sources as you develop enterprise budgets specific to your operation. Check out OSU budgets at: https://farmoffice.osu.edu/farm-management/enterprise-budgets
- Work toward being a low-cost producer by knowing your cost of production. The higher crop prices received recently may be a temptation not to be detailed in tracking expenses. Make sure to track and monitor both variable and fixed expenses. What small steps you can take that will make big changes?
- Enroll in the Ohio Farm Business Planning and Analysis Program to fully understand your farm operations financial strengths and weaknesses. Learn more here: https://farmprofitability.osu.edu/
- Hold family meetings – to discuss finances, review your mission statement, complete a SWOT analysis, and develop goals. See this OSU Extension Fact Sheet: https://ohioline.osu.edu/factsheet/anr-43
- Form and meet with a farm business advisory team that may include one or more of the following: Extension Educator, accountant, lender, nutritionist, crop advisor, insurance agent, and others important to your business. See this OSU Extension factsheet: https://ohioline.osu.edu/factsheet/anr-43
- Utilize OSU Extension resources – Ohio Ag Manager (https://u.osu.edu/ohioagmanager/), Farm Office (https://farmoffice.osu.edu/), Crop Observation and Recommendation Network (https://agcrops.osu.edu/), Beef Cattle Newsletter (https://u.osu.edu/beefteam/), and Buckeye Dairy Newsletter (https://dairy.osu.edu/).