Sugar Producer

WWW.SUGARPRODUCER.COM 17 Untitled-2 1 Untitled-2 1 1/16/23 2:52 PM 1/16/23 2:52 PM tons for only the 5th time ever. e pro- jected year ending stocks provide for a balanced market and adequate supplies for 2023. NET INCOME IS DOWN FOR ALL AG SECTORS Overall net cash farm income is expected to fall by $39.4 billion com- pared to last year. e large decline is, in part, attributed to the record year for corn and soybean returns in 2022 which inflated last year's numbers. Meanwhile, crop returns for many other crop pro- ducers already saw a decline last year. e forecast for the coming year signals a broader downturn for the farm sector, with all crop and livestock farm busi- nesses expected to see falling earnings. Dramatic declines are expected for dairy operations (down more than 40 percent year-over-year), cattle op- erations (down by 25 percent), hog operations (down by nearly 30 percent), wheat operations (down more than 20 percent) and specialty crops (also, down more than 20 percent). Regionally, the largest expected declines in farm income are expected to be found in the dairy regions in the Upper Midwest and Northeast (down by 30 percent year-over-year) and along the specialty crop growing regions in Flori- da, Texas, and the West Coast (down by 24 percent year-over-year). Aer reaching a peak median farm household income in 2021, farm house- hold income (which includes both farm and off-farm income) is expected to fall for the second year in a row to $96,715. WHAT IS PULLING INCOME DOWN IN 2023? Overall, the drop in crop receipts (roughly $9 billion) and livestock receipts (down $14.7 billion) is accom- panied by a whopping increase in input costs (for a third year). e largest increase in costs by percentage is the growth in interest payments on debt (up more than 20 percent). Labor, taxes, seed cost and pesticides are expected to cost more this year. Fertilizer and fuel costs are expect- ed to decline, however, compared to last year. Still the net increase in input costs is projected to be more than $18 billion. Government payments are expected to continue to fall from the high we saw in 2020 (more than $50 billion) above the 10-year moving average aer falling last year to 13.1 percent. at means that debt held by farmers relative to their farm assets is rising, but still at a low level. High levels of debt-to- assets indicates that a farm might be approaching insolvency. As an example, the overall debt-to-asset ratio peaked during the farm crisis of the 1980's at a level near 22 percent. Relatively strong balance sheets are reflected in the fact that current levels of farm bankruptcies are at their lowest point since 2004 at less than 1 bankrupt- cy per 10,000 farms. e debt service ratio (share of production to cover debt payments) has started to rise again though (similar to the debt-to-asset ratio) and working capital available for farm operations has started to fall. So, unfortunately, it's likely that the bankruptcy rate will increase in 2023 following those trends. n to approximately $10 billion in 2023, which will primarily consist of conser- vation payments and ad hoc disaster assistance. at is the lowest level of government payments to agriculture since 2014, despite record levels of input costs. Federal crop insurance indemnities less farm paid premiums are expected to rise by 15 percent in CY2023 to a level of $11.4 billion. (For crop year 2022, there were more than $16.2 billion in re- portable losses, nearly double the losses from 2021, with more than $6.75 billion in farmer paid premium.) THE BALANCE SHEET WEAKENS BUT REMAINS STRONG HISTORICALLY at said, farm income is expected to end CY2023 above the historic 20-year average. e overall debt to asset ratio is expected to rise to 13.22 percent in 2023 That said, farm income is expected to end CY2023 above the historic 20-year average"

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