By MARY HIGHTOWER | U of A System Division of Agriculture

Arkansas’ farm income is expected to fall in 2023 following 2022’s record high, and the decline is expected to exceed the national rate, the Rural & Farm Finance Policy Analysis Center said Monday.

The center, based at the University of Missouri and working with the University of Arkansas System Division of Agriculture, released its “Spring 2023 Arkansas Farm Income Outlook” on Monday. 

“After a record-setting 2022, 2023 Arkansas net farm income declines $1.3 billion and is projected to return to levels closer to 2021,” the report said. “Total farm receipts decline $1.6 billion and are further compounded by increased production expenses.”

The report said that Arkansas is expected to see a 32 percent decrease in net farm income, compared to a projected 19 percent decrease in U.S. net farm income.

 “One contributing factor is the state’s livestock receipts, which decrease more rapidly than national receipts,” the report said. “In Arkansas, poultry and egg receipts make up a larger share of state farm receipts than national receipts; weaker poultry and egg prices in 2023 more than offset any improvements in production.”

James Mitchell, extension economist with the University of Arkansas System Division of Agriculture said that “nationally, we expect fewer disruptions to turkey and egg production from highly pathogenic avian influenza, which will raise output and bring down prices.

“The result is Arkansas is to mostly follow national trends,” he said. “A lot will depend on consumer demand. This will impact what consumers purchase and where they choose to consume it.”

Weather as a driver

Another facet of the decline is that federal crop insurance indemnities are expected to decrease by $342 million, while government payments from commodity programs and ad hoc assistance are projected to fall $152 million from the previous year.

“These estimates assume weather will cooperate more this year than last,” said Hunter Biram, extension economist for the Division of Agriculture. With kinder weather, Arkansas farmers could be expected to see fewer instances of prevented planting and overall, fewer lost cotton acres.

“Last year’s growing season saw above-average rainfall at planting driving larger prevented planting claims in corn and rice,” Biram said. “The hot and dry summer caused large production losses for cotton, resulting in higher STAX payments.”

STAX is a crop insurance product for upland cotton that provides coverage for a portion of the expected revenue for a grower’s area.

Biram said the drop in commodity program and ad hoc assistance can largely be tied to relatively higher prices and the phasing out of some emergency assistance programs.

“PLC payments are projected to fall to zero from $29 million while projected ARC payments remain unchanged at zero,” he said.

Price Loss Coverage, known as PLC and the Agriculture Risk Coverage, or ARC, programs provide financial protections to farmers from substantial drops in crop prices or revenues and are vital economic safety nets for most American farms.

PLC prices are dropping because record-high commodity prices “will not fall below the Reference Price triggering payments,” Biram said. “The fall in ad hoc program payments, or those programs providing payments in response to a disaster event, is attributed to the end of the Coronavirus Food Assistance Program, or CFAP, and the first phase of the Emergency Relief Program, or ERP.

“CFAP phase 2 and ERP phase 1 payments in Arkansas totaled $345.9 million and $158.9 million, respectively, in 2022,” he said.

Arkansas farmers will also be facing slightly higher production costs than 2021, a year which saw record fertilizer pricing. The report said farmers will be seeing a 0.7 percent increase in production costs in 2023, despite the easing of fertilizer, feed and fuel costs.

Federal Reserve actions

“Despite lower fertilizer prices across all major nutrients, total input costs are projected to be up slightly due to an estimated increase of 17 percent in interest expense,” Biram said “This increase in interest expense is driven by the Federal Reserve’s recent increases in the Federal Funds Rate as they attempt to curtail inflation.

“Additionally, we are projecting a 12.2 percent decrease in pesticides, fertilizer, and fuel expense, and a 7.2 percent decrease in feed expense,” he said.

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.

“RaFF’s partnership with the University of Arkansas System Division of Agriculture is a critical step toward identifying and contrasting the uniqueness of farm income factors at the state level,” RaFF interim director Scott Brown said. “The Arkansas farm income report, and other state-level analyses, equip decision-makers with insights that can impact policy and program discussions.”

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.