Arkansas net farm income decline projected to continue in 2024

LITTLE ROCK — Arkansas’ 2024 net farm income is expected to fall $0.5 billion from 2023 levels, according to a report Tuesday from the Rural & Farm Finance Policy Analysis Center.

WIN SOME, LOSE SOME — Arkansas’ 2024 net farm income is expected to fall $0.5 billion from 2023 levels, according to a report Tuesday from the Rural & Farm Finance Policy Analysis Center. (Chart courtesy University of Missouri.)

The “Spring 2024 Arkansas Farm Income Report” has two Arkansas authors, Hunter Biram and Ryan Loy, both extension economists for the University of Arkansas System Division of Agriculture. Additional authors are John Kruse, of World Agricultural Economic and Environmental Services, LLC; and TaylorAnn Washburn of the University of Missouri.

The report said that the state’s projected 15 percent drop in net farm income is smaller than the forecasted 25.5 percent decrease in U.S. net farm income for 2024.

“After record-setting farm income in 2022, Arkansas saw a backpedal in 2023 that is projected to extend into 2024 with another $0.5 billion decline in net farm income,” the report said.

“The No. 1 thing driving the drop of income is lower prices for crops across the board,” Biram said, thanks to abundant harvests of soybeans and corn in Brazil and United States in 2023.

“We have a lot of stocks on hand across most commodities right now which is driving a lot of that drop in crop receipts," he said.

The report said crop receipts are estimated to decline by $0.5 billion as many crop and livestock prices are projected to move lower in 2024.

Biram said the model used in this analysis “is expecting one or two cuts in the interest rate this year, resulting in lower interest expense. Fuel and fertilizer expenses are expected to fall too.”

However, “lower crop expenses and lower crop prices kind of cancel each other out.”

Pumped by emergency payments

Extension economist Hunter Biram was among the authors of the April 2, 2024, farm income report. (U of A System Division of Agriculture photo by Mary Hightower)

“What made 2022 farm income relatively high was all the government payments from emergency relief programs,” Biram said. 

PLC, or Price Loss Coverage, is trigged when marketing year average price of a covered commodity is less than the respective effective reference price.

Biram said that while the data for the analysis is projecting long grain rice to fall below the $14 reference price, “one strong caveat is that this model is stochastic which means is that there are many difference prices that are projected and an average is taken across those prices.

"While there is a low chance of the long grain reference prices falling below $14 per hundredweight, there’s a much higher chance that the average price will be above the reference price and not trigger PLC payments," he said.

Biram is also expecting there to be little chance for ARC –- Agriculture risk program –- payments. 

On the plus side, the report said that “production expenses are projected to offer some relief with a nearly $0.6 billion decline as feed and fertilizer move lower. Although net farm income has declined from record levels, estimated 2024 levels are still higher compared to 2021.”

Livestock sector

Livestock receipts are expected to decline $0.4 billion in 2024 on lower prices for broilers, turkeys and eggs.

Cattle and calves receipts are expected to decline only slightly in 2024, as higher prices help offset lower supplies. Continued projected higher prices in 2025 and 2026 will drive cash receipts higher.

Partnership

The Rural and Farm Finance Policy Analysis Center at the University of Missouri was launched in March 2022. RaFF is closely aligned with the Food and Agricultural Policy Research Institute at the University of Missouri. The center works in partnership with other states to provide objective policy analysis and inform decision-makers on issues affecting farm and rural finances. The center produces farm income projections for states and regions that are consistent with each other. Cooperation with participating states brings local expertise to enhance model design and estimates.

To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on X and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu. Follow on X at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on X at @AgInArk.

2023 Arkansas net farm income down nearly $1B, but still higher than 2021

By Mary Hightower
U of A System Division of Agriculture

Declines in crop and overall livestock receipts and direct government payments add up to a nearly $1 billion decline in Arkansas net farm income for 2023 from the previous year, the Rural and Farm Finance Policy Analysis Center said.

LOW MISSISSIPPI — The shrinking Mississippi River has broader "beaches" as drought continues to plague its basin. taken near the Bridgeport exit of I-55 in West Memphis, Arkansas.  (Division of Agriculture photo.)

The center, working with agricultural economists from the University of Arkansas System Division of Agriculture, said in its “Fall 2023 Arkansas Farm Income Outlook” that Arkansas’ farm income totaled $3.3 billion.

“Arkansas 2023 net farm income is projected to decrease from the record set in 2022,” said Hunter Biram, extension economist with the Division of Agriculture.

The report said that total farm receipts declined $1.4 billion — with farm-related receipts offsetting a $1.5 billion decline in crop and livestock receipts — while production expenses decreased by $3 million and direct government payments fell by $60 million.

The decline in corn receipts is attributed to lower crop prices received despite seeing a 20 percent increase in planted acreage relative to 2022. Corn prices fell 28 percent to $4.75 from $6.65. Biram said the decline “is largely attributed to higher national planted acreage and weaker cash prices received at grain elevators near the Mississippi River driven by record-low river levels.

“Soybean receipts fell 25 percent on lower planted acreage and lower crop prices,” he said.  Cotton receipts fell 8 percent on lower planted acres despite relatively higher crop prices received compared to the 2022 harvest season, while rice receipts increased 11 percent on 330,000 more planted acres compared to 2022.”

Biram said government payments are expected to decline year-over-year from $460 million to $400 million due to Emergency Relief Program Phase 2 payments being $150 million less than ERP Phase 1 payments received in 2022.

“This is also despite Arkansas rice farmers receiving payments from the Rice Production Program, or RPP, which was authorized in the 2022 omnibus package,” Biram said.

Additionally, production expenses remained flat over 2022 despite key operating expenses such as seed, fertilizer, pesticides and fuel falling $177 million. Interest, labor, and rent to landlords increased by $143 million.

“This combination results in a 21 percent decrease in net farm income,” said Biram.

On the bright side

However, the good news is that “despite a decrease from 2022 to 2023, Arkansas net farm income is still above 2015-22 averages,” he said.

The report indicates that despite a decrease in 2023, Arkansas net farm income remains higher than levels seen in 2021. Arkansas is expected to see a 21 percent decline in net farm income, compared to a projected 23 percent decline in U.S. net farm income.

Other key findings from the report include:

• Planted area of the state’s top seven crops, plus hay harvested, grew to 7.2 million acres in 2023. Soybeans, the state’s top field crop by area, saw a decrease in 2023 planted acres. Crop receipts for 2023 decline a combined $600 million.

• Poultry and egg receipts decline a combined $1.1 billion in 2023, largely due to lower prices. Cattle receipts grow by $233 million, while hog receipts decline $9 million.

• Egg receipts decline on lower prices which reflects the industry recovering following Highly Pathogenic Avian Influenza outbreak that affected 44.43 million birds in commercial egg operations, which reflects approximately 14.5 percent of Jan. 1 layer inventories.

• Poultry production is 2.4 percent higher through August and the national composite broiler price is tracking 13.6 percent below 2022. Both lead to lower cash receipts in Arkansas.

• Cattle receipts are higher on cyclically high prices following three consecutive years of contraction in the industry.

• Fertilizer, feed and fuel expenses decrease by 0.03 percent in 2023, with a projected additional 6 percent decrease in 2024.

The fall 2023 farm income outlook is co-published by the University of Arkansas System Division of Agriculture and the RaFF at the University of Missouri, which provides objective policy analysis and informs decision-makers on issues affecting farm and rural finances. The center collaborates with a number of states to develop farm income projections with local expertise.

“Insights developed through our partnership with the University of Arkansas System Division of Agriculture help us better understand the uniqueness of farm income factors regionally,” said Scott Brown, interim director of RaFF. “State-level analyses like the Arkansas farm income report can help producers, policymakers and stakeholders alike be equipped with information to make sound decisions that impact agriculture.”

See the full report and data tables.

To learn about extension programs in Arkansas, contact your local Cooperative Extension Service agent or visit www.uaex.uada.edu. Follow us on Twitter and Instagram at @AR_Extension. To learn more about Division of Agriculture research, visit the Arkansas Agricultural Experiment Station website: https://aaes.uada.edu/. Follow us on Twitter at @ArkAgResearch. To learn more about the Division of Agriculture, visit https://uada.edu/. Follow us on Twitter at @AgInArk.