USDA forecasts smaller drop in 2024 farm income as production expenses ease

US farm income will fall for a second consecutive year in 2024, but not as much as previously expected as prices of livestock and egg products boom and production expenses ease, the U.S. Department of Agriculture said on Thursday.

Declining farm income could ripple across the rural economy in a presidential election year, as producers have become more cautious about making large asset purchases such as new machinery. Crop farmers are wrestling with corn and soybean prices hovering near four-year lows.

The estimated decline is less steep than the agency's February forecast, which called for the largest recorded year-to-year drop in net U.S. farm income in 2024 on rising farm expenses.

USDA now estimates this year's net farm income, a broad measure of profitability in the agricultural economy, will hit $140 billion in 2024, down 4.4% or $6.5 billion from a year earlier.

Adjusted for inflation, net farm income in 2024 is forecast to drop by $10.2 billion, or 6.8%, from a year earlier.

In February, USDA forecast that net farm income would fall more than 25%, or nearly $40 billion, from a year earlier, a record year-over-year dollar drop.

USDA economists changed their estimates after gaining access to information unavailable for the previous forecast, such as the latest U.S. farm census, said USDA Economic Research Service economist Carrie Litkowski, who leads the agency's farm income team.

For example, fertilizer expenses are now expected to ease as crop farmers look to cut production costs. Meanwhile, cattle prices soared, dairy prices turned higher and the spread of avian influenza has led to supply constraints for eggs, Litkowski said.

In fact, cash receipts for egg sales this year are expected to jump about 35%, or $6 billion - the largest increase in the livestock and animal products group, USDA data shows.

"In February, we did not anticipate that egg prices were going to rise as much as they had," Litkowski said.