USDA offers positive outlook for 2025 farm income forecast
The U.S. Department of Agriculture (USDA) held its 101st Annual Agricultural Outlook Forum Feb. 27-28 as a hybrid event online and in person at the Crystal Gateway Marriott in Arlington, Va.
On the first day, USDA Economic Research Service Farm Income Team Lead Carrie Litkowski shared the agency’s farm income forecast for 2025, which seems positive overall.
Litkowski noted information in her presentation was compiled using the Jan. 10 World Agricultural Supply and Demand Estimates and was up-to-date as of Feb. 6.
Net farm income
First, Litkowski noted net farm income and net cash farm income reached record highs in 2024, and while it has since fallen some, USDA forecasts another increase in 2025.
“Income from cash receipts, cash farm-related income, government payments and cash production expenses are forecast to have decreased slightly in 2024 but will increase by about 19 percent, or $31 billion, in 2025,” she stated.
Litkowski further explained net farm income is a more comprehensive measure of income, including non-cash items such as economic depreciation, and accounts for changes in farm inventories. According to USDA, net farm income has decreased by about eight percent in 2024 and is forecast to fall another 26 percent in 2025.
She went on to describe some of the drivers behind this forecasted increase.
“If we start with crop cash receipts, they are forecast to decrease about $5.6 billion. Now for the net farm income measure, we make an adjustment for crop inventories, and we expect less will be sold from crop inventories in 2025 than 2024,” she said.
“When we combine cash receipts with this inventory adjustment, we get a measure of the value of production in a given year. Combined, the value of production is forecast to increase slightly for crops, by about $4.4 billion. For animals and animal product receipts, the value of cash proceeds are forecast to increase $3.8 billion, which would contribute to higher income in 2025,” she continued.
But, Litkowski said, she “left the biggest for last” – government payments, which are forecast to increase $33 billion.
“When we add it all up, this is a $41 billion nominal increase in net farm income or almost 30 percent, although most of the expected increase in 2024 is coming from government payments,” she reiterated.
Cash receipts
Next, Litkowski discussed cash receipts, which are the largest source of income for producers.
In inflation-adjusted dollars, total cash receipts reached an all-time high in 2022, following increases in both receipts for crops and animal products, according to USDA. However, Litkowski said, they are expected to see a total decline in 2025.
“Specifically, we forecast they fell about two percent in 2024 and will fall another three percent in 2025, which would put total cash receipts at their lowest level since 2020,” she said.
For crop cash receipts, USDA forecasts a decline of 11 percent in 2024 and another decline of five percent in 2025, putting total crop receipts at their lowest since 2019. For animals and animal products, the agency predicts an increase of nearly six percent in 2024, which will likely hold steady throughout 2025.
Specifically, corn and soybean cash receipts are forecast to decline through 2025, driving most of the projected decrease in cash crop receipts.
“Because combined corn and soybeans account for about one-half of total crop receipts, corn specifically is forecast to fall about seven percent, or $4 billion, in 2025, while soybeans are forecast to fall $4 billion as well – about 9.5 percent,” Litkowski said.
“For both of these commodities, this would be the third year of declining receipts,” she added. “On the other hand, receipts for vegetables and melons are forecast to increase, as are cotton receipts.”
For animal-related receipts, USDA noted an increase in 2024, but the outlook for 2025 shows cattle cash receipts declining almost three percent in 2025 – the first actual decline since 2020, according to Litkowski.
Litkowski also noted egg receipts are forecast to decline four percent, while dairy, broiler and hog receipts are all forecast to increase throughout 2025.
Government payments
Litkowski reiterated the majority of the increase seen in farm income is due to direct government payments – payments made directly to farmers, with no intermediaries, through the federal government and usually from farm programs or ad hoc disaster assistance programs.
In inflation-adjusted dollars, total direct government payments reached a record high in 2020, largely due to COVID-19 related assistance. Litkowski said government payments have declined each year since, but are forecast to increase in 2025, with most of this increase coming in as supplemental and ad hoc disaster assistance, most of which was appropriated in the American Relief Act of 2025.
“Then we have payments that are a function of commodity prices, like agricultural risk coverage and price loss coverage programs,” she said. “They are forecast to increase in 2025, as are conservation payments. But, in total, governmental payments are forecast at $42 billion in 2025, which would be an increase of $33 billion with inflation adjusted.”
USDA also reports data on net farm income excluding federal payments to farmers, which are forecast to remain relatively stable across 2024-25.
“They are forecast to increase about $5.2 billion, so even without these federal payments, other sources of net income would be slightly higher in 2025 and, primarily, this increase is coming from lower government payments expected in 2025,” she said.
Input costs
Additionally, Litkowski noted production expenses increased every year from 2019-23, with the most notable increase occurring in 2022.
“In 2024, we are forecasting production expenses fell about four percent as prices for production inputs – or some of them – started to decline in 2024. In 2025, we project they will fall another one percent – or three percent when adjusted for inflation,” she said.
Of the items, USDA predicts will require lower spending, feed is at the top of the list, and feed expenses are forecast to continue to decline through 2025 after reaching a record high in 2022.
Litkowski said they are now forecast to see a 10 percent decline, which would be the largest percentage and dollar decline among these items, but there is also an expected decline for interest, fertilizer, pesticide, fuel and oil.
However, Litkowski admitted not all production expenses are expected to fall in 2025.
She noted spending on labor and livestock and poultry purchases, which are expected to continue increasing in 2025, would reach record highs even after adjusting prior years for inflation.
“Specifically, labor is forecast to increase about four percent and livestock and poultry purchases by about seven percent,” she said. “Also, there is an expected increase in spending on seeds, taxes and fees and net rent.”
Debt
To wrap up her presentation, Litkowski made some comments on the current state of debt in the agriculture industry.
She noted farm equity, or asset-less debt, has increased every year since 2019 and is projected to continuing increasing another three percent in 2024, then another two percent in 2025. This is largely due to increases in farm real estate assets, which include the value of farmland and buildings, accounting for about 80 percent of all farm sector assets.
Furthermore, Litkowski pointed out debt has trended upward since 1994, but is forecast to increase about two percent in 2024 and another one percent in 2025.
“Solvency ratios can be an indicator of the farm sector’s ability to repay financial liabilities through the sale of assets,” Litkowski explained. “These have generally been improving since 2021, which is shown by declining values.”
USDA expects these ratios to improve slightly through 2025, remaining above the 10-year average.
“We can also try to look at aggregate rates in the farm sector by looking at liquidity and bankruptcy rates, which have been declining since 2020, and in 2023, they reached their lowest value in 20 years,” she said.
However, USDA projects these will increase in 2024.
“Service ratios indicate how much production income farmers are having to use in order to make payments on debt, and this ratio has been increasing in 2023-24, indicating reduced liquidity and that they are having to spend more of their production income on making debt payments,” she concluded. “But it is forecast to fall in 2025, largely reflecting expectations for lower interest expenses.”
Hannah Bugas is the managing editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.
