2022 Farm Sector Income Forecast
Suggested citation for linking to this discussion:
U.S. Department of Agriculture, Economic Research Service. Farm Sector Income & Finances: Farm Sector Income Forecast, February 4, 2022.
Net farm income, a broad measure of profits, is forecast to decrease by $5.4 billion (4.5 percent) from 2021 to $113.7 billion in 2022. This expected increase follows a forecast increase of $23.9 billion (25.1 percent) in 2021. Net cash farm income is forecast to increase by $1.9 billion (1.4 percent) to $136.1 billion in 2022, after a forecast increase of $17.0 billion (14.5 percent) in 2021. In inflation-adjusted dollars, 2022 net farm income is forecast to decrease by $9.7 billion (7.9 percent); net cash farm income is forecast to decrease by $2.9 billion (2.1 percent). If realized, net farm income and net cash farm income in 2022 would remain above their 2001–20 average (in real terms).
Note: In the text below, year-to-year changes in the major aggregate components of farm income are discussed only in nominal dollars unless the direction of the change is reversed when looking at the component in inflation-adjusted dollars.
- Overall, farm cash receipts are forecast to increase by $29.3 billion (6.8 percent) to $461.9 billion in 2022 in nominal dollars. Total crop receipts are forecast to increase by $12.0 billion (5.1 percent) from 2021 levels to $248.6 billion. Soybean, corn, cotton, and wheat receipts combined are forecast to increase by $11.7 billion (8.2 percent) in 2022, accounting for almost all the forecasted growth in crop cash receipts. Total animal/animal product receipts are expected to increase by $17.4 billion (8.9 percent) to $213.3 billion following increases in receipts for milk, cattle/calves, and broilers.
- Direct Government farm payments are forecast at $11.7 billion in 2022, a $15.5 billion (57.0 percent) decrease from 2021 forecast levels. Direct Government farm payments include Federal farm program payments paid directly to farmers and ranchers but exclude U.S. Department of Agriculture (USDA) loans and insurance indemnity payments made by the Federal Crop Insurance Corporation. Much of this decline is because of lower supplemental and ad hoc disaster assistance to farmers and ranchers related to the coronavirus (COVID-19) pandemic compared with 2021.
- Total production expenses, including those associated with operator dwellings, are forecast to increase by $20.1 billion (5.1 percent) in 2022 to $411.6 billion. Nearly all categories of expenses are forecast to be higher in 2022, with feed and fertilizer-lime-soil conditioner purchases expected to see the largest dollar increases.
- Farm sector equity is expected to increase by 1.0 percent in 2022 to $2.85 trillion in nominal terms, a decline of 2.5 percent after adjusting for inflation. Farm sector assets are forecast to increase 1.3 percent (nominal) in 2022 to $3.31 trillion following increases in the value of farm real estate assets. When adjusted for inflation, both total assets and farm real estate assets are forecast to fall by 2.2 percent and 2.5 percent, respectively. Farm sector debt is forecast to increase 2.9 percent in 2022 to $467.4 billion in nominal terms but fall by 0.7 percent when adjusted for inflation. Debt-to-asset levels for the sector are forecast to increase from 13.89 percent in 2021 to 14.11 percent in 2022. Working capital is forecast to fall by 3.3 percent in 2022.
Growth in Crop Receipts Forecast for 2022
Crop cash receipts are forecast at $248.6 billion in 2022, an increase of $12.0 billion (5.1 percent) from the forecast for 2021 in nominal terms. Growth in receipts for corn, soybeans, wheat, and cotton are forecast to account for almost all of the net increase, while receipts are expected to fall for fruits and nuts.
Corn receipts are forecast to increase by $3.4 billion (4.8 percent) in 2022, resulting from higher quantities sold. Soybean receipts in 2022 are expected to increase $4.6 billion (8.9 percent), as forecasted growth in quantities sold should outweigh effects of lower prices. Cotton receipts are forecast to increase by $2.5 billion (33.8 percent), driven by growth in both prices and quantities sold. Expected growth in quantities sold should result in a gain in wheat receipts; they are forecast $1.2 billion (10.6 percent) higher in 2022.
Vegetable and melon cash receipts are expected to grow by $0.4 billion (2.5 percent) in 2022, as higher forecasted prices should outweigh a decline in quantities sold. This increase includes a rise of $0.2 billion (6.1 percent) in potato receipts. Cash receipts for fruits and nuts are expected to fall $1.2 billion (4.8 percent) in 2022, as the effects of falling prices should be larger than growth in quantities sold.
Animal/Animal Product Receipts Forecast to Increase in 2022
Total animal/animal product cash receipts are expected to increase $17.4 billion (8.9 percent in nominal terms) to $213.3 billion in 2022. Growth in receipts is forecast for milk, cattle and calves, and broilers, while hog receipts are expected to decline.
Milk receipts are expected to increase $9.3 billion (22.1 percent) in 2022, mostly due to expectations for strong price growth. Similarly, forecasted higher prices should drive an increase of $6.2 billion (8.5 percent) in receipts for cattle and calves. Lower prices are expected to result in a decline of $2.8 billion (10.3 percent) in hog cash receipts in 2022.
Broiler receipts are expected to increase $4.0 billion (12.3 percent) in 2022, mostly due to higher expected prices. Receipts for turkeys and chicken egg cash receipts are each forecast to increase 3 percent in 2022 relative to 2021 in nominal terms but fall when adjusted for inflation.
Expected Growth in Prices and Quantities Sold Raise 2022 Cash Receipts Forecast
To better understand the factors underlying the forecast change in annual receipts from 2021 to 2022, we separate the change into two distinct effects: a "price effect" where we project the change in cash receipts associated with holding the quantity sold constant at 2021 levels and allowing prices to change to forecast 2022 levels, and a "quantity effect" where prices are held constant from 2021 and quantities change to forecast 2022 levels. In 2022, both increasing prices and quantities sold are expected to have positive effects on cash receipts. Overall, crop and livestock sector cash receipts are forecast to increase $29.3 billion in 2022, with an estimated positive price effect of $14.3 billion, and a projected positive quantity effect of $14.0 billion. In addition, an upward shift of $1.1 billion is from forecasts for commodities whose price and quantity effects cannot be separately determined. As discussed above, we do find divergence in these effects by commodity group. Price effects on cash receipts for livestock commodities are positive, while quantity effects are slightly negative. Conversely, quantity effects on cash receipts for crops are positive, while price effects are negative.
Direct Government Farm Payments Forecast to Decrease in 2022
Direct Government farm program payments are those made by the Federal Government to farmers and ranchers with no intermediaries. Typically, most direct payments to farmers and ranchers are administered by the USDA under the Farm Bill or other authorities. Direct payments can also be from ad hoc and supplemental programs authorized by Congress. Government payments do not include Federal Crop Insurance Corporation (FCIC) indemnity payments (listed as a separate component of farm income) and USDA loans (listed as a liability in the farm sector’s balance sheet). After reaching a record high of $45.7 billion in 2020, direct Government farm program payments are forecast to decrease to $27.1 billion in 2021 and to decrease further to $11.7 billion in 2022. This overall decrease in 2021 and 2022 reflects lower anticipated payments from supplemental and ad hoc disaster assistance, mainly direct payments from COVID-19-related assistance programs.
- Supplemental and ad hoc disaster assistance payments in 2022 are forecast at $6.2 billion, a decrease of $13.6 billion from 2021, primarily because of lower total payments from COVID-19-related assistance programs.
- USDA pandemic assistance for producers, including the Coronavirus Food Assistance Program (CFAP), provides relief to producers whose operations are directly affected by COVID-19. Payments in calendar year 2022 from these USDA programs are forecast at $3.4 billion compared to $23.5 billion in 2020 and $7.8 billion in 2021.
- Non-USDA pandemic assistance (payments from the Paycheck Protection Program (PPP), administered by the Small Business Administration), ended on May 31, 2021 and no payments are expected in 2022. Non-USDA pandemic assistance is forecast at $8.7 billion for 2021. The PPP payments are designed to help small businesses keep their workers on the payroll. Although administered as a loan, the loans will be forgiven if the program's requirements are met. We assume all recipients will meet the loan-forgiveness requirements. Accordingly, we treat these loans as a direct payment to farm operations. The forecast amounts may be revised as more data become available, with any unforgiven amounts included as a liability on the farm balance sheet and removed from direct payment totals.
- Conservation payments from the financial assistance programs of USDA's Farm Service Agency (FSA) and Natural Resources Conservation Service (NRCS) are expected to be $4.2 billion in 2022, up 7.3 percent from 2021. The increase in conservation payments is due to slight increases in Conservation Reserve Program (CRP)-enrolled acres and an increase in payments from NRCS programs.
- The Dairy Margin Coverage Program is forecast to make net payments of $1.0 billion to dairy operators, compared with $1.1 billion in 2021. The decrease is mainly due to an increase in milk prices that is greater than the increase in feed costs.
- Farm bill commodity payments under the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs are forecast to decline $4.0 billion in 2021 relative to 2020 and then another $1.9 billion in 2022 to $0.3 billion. ARC payments in 2022 are expected to be $5.1 million, a decrease of $116.7 million from 2021 levels. PLC payments in 2022 are expected be $0.3 billion, a decrease of $1.8 billion from 2021 levels. ARC payments are expected to decrease in 2022 because of higher commodity prices for all covered commodities and higher yields in 2021 compared with 2020 levels, particularly for corn and soybeans. PLC payments are also expected to decrease in 2022 because of higher prices for all covered commodities in 2021 compared with 2020.
See data table on government payments.
Production Expenses Forecast to Increase in 2022
Farm sector production expenses—including expenses associated with operator dwellings—are forecast to increase by $20.1 billion (5.1 percent) to reach $411.6 billion in 2022. This follows a 9.4 percent increase in nominal expenses in 2021. If these forecasts are realized, 2022 production expenses would be the highest since 2015 yet still 11.1 percent below the 2014 peak in inflation-adjusted terms.
See data tables on production expenses.
Nearly all expense categories are forecast to rise during the year, with the most significant increases in nominal terms for the following categories:
- Feed expenses, the largest single expense category, are forecast to increase in 2022 by $3.9 billion (6.1 percent) in nominal terms to $68.9 billion because of higher prices for feed commodities.
- Fertilizer-lime-soil conditioner expenses are forecast to increase by $3.4 billion (12.0 percent) in nominal terms to $31.9 billion.
Among the main expense categories, seed expenses are expected to remain unchanged, while the net rent to landlords is expected to decline by $1.2 billion (6.6 percent) to $17.6 billion, in nominal terms.