SIOUX FALLS, S.D. (KELO) — Farmers in South Dakota and in all of the U.S. should prepare to make less money than in the record net cash income of 2022, according to the 2023 forecast from the U.S. Department of Agriculture (USDA).
The USDA released its forecast on Thursday, Feb. 23. While net cash income for farmers is expected to decline that doesn’t mean prices in the grocery store will also decline, the USDA said.
The USDA forecast said net cash farm income will decrease by $44.72 billion or 23% from 2022. The income prediction is adjusted for inflation. But 2022 was a record year when the net cash farm income was $150.56 billion.
While 2023 will be less than 2022, it will still be above the $130.5 billion average net cash income from 2002-2021.
In contrast, the USDA said in a February forecast that although food prices will increase more slowly in 2023 than in 2022, they will still be above historical averages. All food prices, those in the grocery store and those for eating out, are expected to increase by 7.9%. Higher shipping costs, shipping constraints, increases in wages, limited supply and other factors have contributed to higher food prices. Some factors are easing but not enough, economists said, to stave off increases in food prices.
Agriculture is often referred by the state and the USDA as the state’s top industry. Gov. Kristi Noem’s office says agriculture contributes $32.1 billion to the economy. It accounts for almost 30% of South Dakota’s total economic output.
Some of the same factors that impact consumers impact farmers such as drought, the war in Ukraine, shipping costs etc. Those all impact input costs for feed, fertilizer, equipment and the like.
South Dakota farmers generate their revenue or cash from several products. A state Department of Agriculture and Natural Resources (DANR) report released in 2021 said the top cash generating commodities were cattle and calves, corn, soybean, hogs and dairy products.
When it comes to grain, several factors will contribute to the decrease in income including more crops acres planted, a return to higher yields and subsequent lower prices for grain.
Prices for most grain will be lower in 2023.
If South Dakota follows the forecast, more crop acres will be planted and yields will be better than in 2022, but prices per bushel will be lower.
The value of farm real estate is expected to increase but the value of assets such as equipment, machinery, investments and the like, are expected to decrease.
The per bushel price for corn will be down about $1.10. Earlier in February, the USDA said, the per bushel price for corn reached a peak of $6.80 to $5.70 per bushel. Thursday’s report listed the per bushel price for corn at $5.60.
Estimated cash receipts for corn in 2020 were $2.14 billion, according to the 2021 DANR report.
Farmers in South Dakota produced 661 million bushels of corn in 2022, according to the USDA. At $5.60 per bushel that’s about $3.7 billion. At a per bushel price of $6.70 that’s about $4.2 billion. If the per bushel corn price decrease of $1.10 is multiplied by 661 million bushels that is a $991,500,000 decrease. Still, the forecast is for the average and prices can vary depending on time of sale, buyer, location and quality of the corn.
It’s a mixed bag on soybean prices.
The soybean season-average farm price is projected at $12.90 per bushel, the USDA said.
Prices could be near record levels of 2022 but a healthier South American crop will keep prices lower in the later part of the year.
South Dakota had 193 million bushels of soybeans in 2022, according to the USDA.
The 2020 estimated cash receipts for soybeans was $1.64 billion, according to the DANR.
South Dakota farmers also produce hogs and cattle.
Cattle prices should remain healthy in 2023, the USDA said. They are expected to increase by $2.13 billion in the U.S. but other animal and animal product prices will decline.
Cattle receipts totaled an estimated $2.73 billion in 2020 in South Dakota.
The 5-Area steer price for 2023 is forecast to average a record $159.0 per cwt, approximately $15 per cwt above 2022’s average price. U.S. production is expected to decrease.
The number of cattle on feed in South Dakota as of December has declined since 2020. The December numbers are not totals for the year.
In December of 2020, there were 250,000 cattle on feed. There were 235,000 in December of 2021.
The number of cattle on feed in South Dakota on Dec. 1 was down from the prior year. The USDA said in operations of 1,000 or more head of cattle, there were 220,000 cattle on feed. This was down in 6% from 2021.
While cattle production is expected to decline, hog production will increase in 2023. Although markets will still be strong, even higher than in 2022, the prices farmers will receive will still be lower than in 2022.
Hog prices are forecast to decline to $66.5 per cwt from $71.21 in 2022.
The hog inventory on Dec. 1, 2021, in South Dakota, was 2 million. It was 2.08 million on Dec. 1, 2022.
Dairy prices are calculated per hundredweight or by CWT. A CWT is equal to 100 pounds.
CWT prices are expected to decline in 2023 but will be the second highest price since 2014, according to the USDA.
The price is forecast to be $20.70 per cwt. It’s a $4.90 drop from 2022.
Milk production per cow averaged 1,870 pounds per month.
To get an idea of how much income a single cow could produce each month, use the cwt and average monthly milk production of a cow. It’s not exact. And it doesn’t factor in expenses such as feed.
At $20.70 per cwt, it would be $387.09 monthly per cow, based on the 2022 November average production of 1,870 pounds per cow. At the 2022 cwt price of $25.60, it would be $478.72 per cow.
Overall, the USDA forecasts a 5.7% decline in animal and animal product cash receipts for 2023.