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Economist: Recent Farm Income Forecast Reason for Concern

Economist: Recent Farm Income Forecast Reason for Concern

The Department of Agriculture released its 2022 Farm Sector Income Forecast, which showed a mixed bag for the farm economy.

USDA’s Economic Research Service predicts producer cash receipts will increase 21 percent to more than $525 billion nationally. Crop values are expected to increase nine percent year-over-year, while cash receipts from animal production will be up 28 percent from 2021 numbers.

Despite elevated commodity prices, farmers are not expected to report record paychecks, with farm income off by roughly 30 percent.

University of Idaho ag economist Garth Taylor says the drop in income is thanks to a host of domestic and international issues, from drought to input costs to the war in Ukraine, and a variety of other challenges.

“But despite all of those headwinds, farmers were very high to a high on their cash receipts. They can overcome those things with higher prices, but it’s inflation that’s nailing farmers. It did it in the 1980s, and it’s threatening farms right now. And that bottom line is something we’ve really got to watch.” 

When it comes to eating away at the bottom line, Taylor noted that fertilizer prices are up a projected 52 percent this year, fuel is up 42 percent and interest payments jumped 40 percent.

Farm economists and Congressional lawmakers fear continued Federal Reserve interest rate hikes will further damage the economy, even if the fires of inflation are extinguished.

 The Federal Reserve is committed to continue raising interest rates ‘til inflation is tamed. Chairman Jerome Powell has said as much, and that has farm economists like American Farm Bureau’s Bernt Nelson concerned.

With the basis point adjustment, we really saw some strengthening happening with the U.S. dollar comparatively to other countries. So, as the dollar increases in value relative to other countries, that makes our products more expensive for these other countries to purchase. And that could result in things such as a slow(ing) in exports of some of our products, like meats.”

President Biden and his party downplay the chances for a full-blown recession, while Republicans seeing a political advantage ahead of the midterm elections, play it up. Senate GOP Leader Mitch McConnell.

“The Chairman of the Fed’s been quite clear. We’re going to have to raise rates. That runs the risk of having a recession, and that’ll be the price the American people have to pay.”

For spending bills Republicans blame for inflation and Democrats say were needed for COVID, climate change, and healthcare. But despite the political finger pointing, AFB’s Nelson says consumers could still suffer.

“When we start to see these recessions looming, or when we start to see an economic slowdown, we typically see consumers shift toward getting a better deal at the grocery store rather than necessarily purchasing a premium product.”

AFB reported this week that skinless tom turkey breasts cost 112 percent more this September over last, while a dozen grade A large eggs were up by 27 percent.