US agriculture is set for its biggest price slump in 18 years

A sharp drop in crop prices coupled with rising production costs is set to slash U.S. net farm income this year, though inflation may be masking the significance of these price and income declines, especially in relation to past years. The U.S. Department of Agriculture last week forecast 2024 net farm income at $116 billion, down from $156 billion in 2023 and a record $186 billion in 2022, all in nominal dollars. That would be the fifth-highest on record after the past three years plus 2013.

But inflation-adjusted, the 2024 forecast is 4% below the 20-year average and down 41% from 2022. That would mark the biggest two-year decline in net farm income by percentage since 1983, when the U.S. rural economy was caught in a major agricultural crisis. Net farm income of $116 billion in 2024 would be down 27% from the inflation-adjusted 2023 total, and would represent the largest annual decline since 2006.

Some inflation-adjusted commodity prices are not far off 2020’s low levels, and 2020 would have been an extraordinarily difficult year for farmers if not for massive government payments for both trade war- and pandemic-related losses. Direct government payments were responsible for about 48% of U.S. net farm income in 2020, the highest share since 1983. Discounting government payments, total inflation-adjusted net farm income in 2020 was the lowest since 2002.

Trade war dollars could become relevant again in 2025 pending the outcome of the U.S. presidential election later this year, as candidate and former President Donald Trump earlier this month pledged to enforce steep tariffs on Chinese goods if elected. USDA’s forecast implies direct government payments will account for nearly 9% of net farm income in 2024, a three-year high but well below average, pre-trade-war levels.