Factors Behind Declining Income

Net farm income in Nebraska, while still high by historical standards, declined in 2022 and is expected to decline again in 2023. Trends in commodity prices, input costs, and production are behind the income declines. Figure 1 plots price indices for average monthly corn and soybean prices in Nebraska from January 2011 through July of this year (the last month average prices are available). The base period for comparison is 2007-2010 averages, a relatively stable period for agriculture in terms of income. Values above 100 indicate prices are higher relative to the 2007-2010 averages. Corn and soybean prices through July, while lower than last year, were relatively high compared to prices during the base period and prices between 2014-2020. However, Figure 1 does not show that the markets have changed dramatically since July. Current cash bids for corn and soybeans, around $4.50 and $12.30 per bushel respectively, are down considerably since July. Lower prices combined with lower yields and production because of drought means crop revenue will likely be lower in 2023. 

At the same time, input costs have fallen but remain above average. Figure 2 plots national price indices for fertilizer, chemicals, and diesel as proxies for input costs into crop production. Again, the base period for comparison is the 2007-2010 averages. Figure 2 illustrates the large cost increases crop producers have experienced since midyear 2021. And while the recent declines in input prices will help soften costs in the future, the decline will not provide much relief this year as most inputs were purchased earlier in the year. 

Relative to crop producers, the potential for income gains is better for cattle producers as cattle prices have been trending higher this year. In fact, both feeder and fed cattle prices in Nebraska have hit record highs (Figure 3). Data from the USDA Agricultural Marketing Service shows the average fed cattle price in June was $186.78 per cwt., a record price. The previous high occurred in November 2014. Prices for feeder cattle also hit a record high in June at $315.54 per cwt for 500-600 lb. steers. The previous record occurred in June 2015. Fewer cattle and a stable demand for beef are the primary reasons for the heftier cattle prices. But drought forced many cow/calf producers to liquidate part of their herds over the past two years. A smaller herd means fewer calves to sell, feed, and process. So, despite the higher prices, fewer numbers create uncertainty on how total revenues in the cattle sector will shake out relative to 2022. 

Feed costs for cattle producers, though, are historically high too. Figure 4 plots price indices in Nebraska for hay, alfalfa, and corn, important feedstuffs for cattle producers. Again, the base period for comparison is the 2007-2010 averages. As seen in Figure 4, feed costs have stabilized this year, but remain 1.5-2.0 times higher than the base period.