Government payments drive increase in 2025 U.S. farm income

Based on the data in the latest “2025 Farm Income Forecast” that was released by the USDA Economic Research Service in February, U.S. net farm income is expected to increase by $41 billion or 29.5% above 2024 levels, following two years of sharp decline in 2023 and 2024.

The 2025 net farm income is now estimated at $180.1 billion, which would be the second-highest net farm income since 2010, only trailing the 2022 net farm income level of $182 billion. The projected significant increase in 2025 net farm income was mainly driven by a projected large increase in government farm program payments, much of which will be one-time payments resulting from the American Relief Act that was passed by Congress late in 2024.

In the recent farm income report, USDA estimated total U.S. net cash income for 2024 at $193.7 billion, which is an increase of $34.5 billion or 21.7% from a year earlier; however, approximately $31 billion of that total is projected to be the result of the “ad-hoc” government payments. Net cash income includes cash receipts from all farm-related income, including government payments, minus cash expenses for the year. Generally, net farm income is a truer measure of overall profitability in the farm sector.

The following are some highlights from the latest USDA 2025 Farm Income Report:

• Overall, 2025 cash receipts for all commodities on U.S. farms are estimated at $515 billion, which is a decline of $1.8 billion or 0.3% compared to 2024.  
• Total 2025 crop receipts are estimated at $239.6 billion, representing an expected decrease of $5.6 billion or 2.3% below 2024 levels. The decline in crop receipts is primarily due to an anticipated decrease in cash receipts from corn and soybeans in 2025, which are expected to decline by $2.7 billion for corn and by $3.1 billion for soybeans from a year earlier. This decline is largely due to expected further declines in commodity prices in the coming year. Receipts from other crops in 2025 are expected to remain fairly steady, with only minor downward adjustments from 2024 levels.
• The projected total cash receipts from livestock production in 2025 are estimated at near $275.4 billion and are expected to increase by $3.8 billion or 1.4% from a year earlier. This is primarily due to expected increases in total receipts from the production of milk, hogs and broilers, compared to a year earlier. Receipts from cattle sales are expected to decline slightly in 2025, while receipts from egg production are expected to decrease by $600 million this year; however, that decline could be even greater due to the impacts of avian influenza. The impact of potential tariffs could alter these livestock income projections. 
• The significant level of government farm program payments in 2025 will have a major impact on net farm income and net cash income levels for the year. The estimated direct government payments to be paid to farmers in 2025 was listed at $42.3 billion, which compares to $9.3 billion in 2024. The 2025 government payment level would be the second highest total amount in the past 16 years, only being surpassed by just over $45.6 billion in the “Covid-year” of 2020. Approximately $31 billion or nearly three-fourths of the total 2025 payments will be for one-time “ad hoc” disaster assistance and economic assistance payments. The projected government payments also include traditional PLC and ARC-CO farm program payments and conservation payments, but do not include receipts from crop insurance indemnity payments.  
• Total farm expenses are estimated at $450.4 billion in 2025, which is a decrease of $2.5 billion or 0.6% from 2024. This followed decreases of $9 billion in 2024 from 2023. The 2025 total farm expenses for feed, fertilizer and pesticides are projected to show the largest decreases. Interest expense is expected to decrease by 0.5% in 2025, which would be the first decline since 2020. Farm labor expense is expected to increase by 3.6% in 2025 to the record level of $53.1 billion. The expenses for seed, property taxes, and fees are also expected to increase in 2025. 

• “Working Capital,” which measures the cash available after all farm expenses have been paid and all annual debt payments have been made is expected to increase by 3.9% by the end of 2025, largely due to the added government farm program payments. This followed a decline of 6.7% in farm working capital a year earlier. Deterioration of working capital was a major concern in many farm businesses during the tight farm profit years on 2014-2020. The “current ratio” and the "debt service coverage ratio" also deteriorated in 2024. The current ratio measures the value of current assets that have not been sold to cover unpaid expenses and current-year debt obligations. The debt service coverage ratio measures the ability of farm profits to cover required annual principal and interest payments on farm loans.
  

Even though total U.S. farm debt is relatively low, it should be noted that total farm debt in 2025 is expected to increase by 5.2% or about $16.6 billion, raising the total U.S. farm debt to $561.8 billion. Of that debt total, approximately two-thirds is real estate debt, with the balance from other farm loans. 
The overall farm sector debt-to-asset ratio is projected to remain relatively low at 12.93% at the end of 2025; however, this is a small increase from 12.84% in 2024 and 12.78% at the end of 2023. The debt-to-equity ratio at the end of 2025 is expected to decrease to 14.65%, from 14.73% at the end of 2024. Current debt-to-equity ratios are well below the record high ratio of 22.2% in 1985.

While the U.S. net farm income projections do show some dramatic improvement in 2025 as compared to the previous two years (2024 and 2023), there is a degree of caution due to high level of one-time “ad hoc” government farm payments. The very high net farm income levels from 2021 to 2023 were primarily driven by some of the highest crop prices in the past decade, along with very manageable farm production expenses and low interest rates.

Total receipts from crop and livestock sales for 2025 on U.S. farms are projected to be very similar to 2024 and 2023 levels, with some variation within crop and livestock commodities. Total cash expenses on U.S. farms are projected to show a small decline in 2025; however, overall farm expenses remain at quite high levels. It should also be noted that there will be considerable disparity in the level of government payments among individual farmers.

Contributed

If no other sources of farm income are accounted for, the margin between total U.S. crop and livestock receipts in 2025 and total farm expenses is estimated at $63.9 billion. The projected 2025 margin is less than half of the margin of $134.4 billion in 2022. Back in 2017, the margin between cash receipts and cash expenses was $58.5 billion and the final U.S. net farm income for the year was only $75.1 billion, which was the lowest in the past eight years (2017-2028).

Government farm program payments are likely to help make up some of the farm income deficit in the margin between total cash receipts and farm expenses in 2025. Government payments are expected to account for 23% of the net farm income in 2025, which compares with 8-9% each year from 2022 to 2024, and would be the second highest percentage, trailing only the 48% of net farm income in 2020.

There are certainly some positive factors in the projected 2025 net farm income and profitability levels revealed in the latest USDA farm income report, due to improved profit levels in livestock production and the added government farm program payments. However, there are also “yellow caution flags” in the report due to the projected lower receipts from corn and soybeans and the continuation of relatively high farm production expenses. A big key to farm profitability going forward will be any impacts on crop and livestock prices and farm production expenses during 2025 resulting from possible tariffs between the U.S. with Canada, Mexico, China, and other countries. Of course, the potential for drought and other weather events are always a big wild card in final U.S. net farm income figures from year-to-year.

Kent Thiesse is a Farm Management Analyst and writes the weekly "Focus on Ag" column. Contact him by phone at (507) 381-7960 or by email at kentthiesse@gmail.com.