MT. JULIET, Tenn. (DTN) -- USDA forecasts climbing farm income in 2025, but it's due to a dramatic increase in government payments, not better prices or a higher volume of sales.

Net farm income, which is a comprehensive measure of farm profitability, is forecast at $180.1 billion, an increase of $41 billion, or 29.5%, from 2024.

Net cash farm income, which is intended to better reflect annual cash flow by excluding inventory changes and depreciation, is forecast at $193.7 billion, an increase of $34.5 billion, or 21.7%, from the previous year.

USDA tracks many categories in its analysis, including cash receipts, government payments and production expenses, on a per sector basis. It then combines all sector analysis to arrive at its headline numbers.

The largest year-over-year change is in the amount of government payments, which are forecast at $42.2 billion, a $33.1-billion increase from 2024. This category includes payments from federal farm programs like the Conservation Reserve Program, Agriculture Risk Coverage, Price Loss Coverage and more. It excluded crop insurance indemnities and USDA loans.

"Supplemental and ad hoc disaster assistance payments in 2025 are forecast at $35.7 billion and consist primarily of payments from the Disaster Relief Supplemental Appropriations Act of 2025. The act included the Economic Assistance for Producers and other payments related to losses due to natural disasters in 2023 and 2024," the report stated.

Shon Myers, president and CEO of Farmers & Merchants Bank in southwest Ohio, said most farmers in their portfolio increased the amount of their operating notes this winter.

"It's just been an ongoing theme, fertilizer and things keep getting more and more expensive every year," he told DTN in an interview. "Margins are tough."

CASH RECEIPTS BY SECTOR

While government payments are forecast to grow, cash receipts for crops are expected to decline by $5.6 billion, or 2.3%, to $239.6 billion. Corn and soybean receipts are expected to fall by $5.8 billion, with slight increases in vegetable, melon, fruit and nut receipts offsetting some of the decline. Corn receipts are expected to be 4.3% lower than last year and soybeans 6.6% lower.

On Wednesday, 11 farmers testified before the U.S. Senate Agriculture Committee, all sharing stories of year-after-year of red ink and calling for Congress to improve the safety net in the next farm bill.

"On average, (the) American corn farmer is facing losses over $160 per acre of corn for the 2025 crop year" after losing more than $100 per acre last year, said Kenneth Hartman Jr., an Illinois farmer and president of the National Corn Growers Association (NCGA). You can read more of his and other farmers' testimony here: https://www.dtnpf.com/…

USDA anticipates both lower prices and lower quantities sold will contribute to lower cash receipts in 2025.

Projections for overall animal and animal product receipts are $3.8 billion higher than last year at $275.4 billion, with milk, hog and broiler receipts climbing. Milk receipts are forecast $1.4 billion higher; hog receipts, $1.5 billion higher; and broilers $1.4 billion.

Cash receipts for cattle and calves are forecast to decline $200 million, or 0.2%, while chicken egg receipts are forecast to decline $0.6 billion, or 2.2%, on forecasts of lower prices.

PRODUCTION EXPENSES

USDA forecasts production expenses, which include operator dwellings, to decline for the second year in a row. Farmers are expected to spend $450.4 billion in 2025, $2.5 billion less than last year. The largest decline is expected in feed bills, while the largest increase is in the cost of the livestock/poultry purchases.

Feed expenses are the largest category of spending and are forecast at $62.4 billion, the lowest level in inflation-adjusted terms since 2007.

Labor expenses are forecast to be record high in 2025, climbing 3.6% from last year to $53.5 billion.

Livestock and poultry purchases are also forecast to set a record at $50.5 billion. That's a 6.5% increase from 2024.

On the crop production side, fertilizer and pesticide costs are forecast to decline. USDA anticipates farmers spending $3.6 billion less on fertilizer, or about $29.2 billion in total.

Spending on agricultural chemical and application costs are likely to continue a decreasing trend that began in 2022, with USDA forecasting outlays of $18.1 billion, or 6% less than last year.

Seed prices are expected to rebound in 2025 after falling in 2024, and USDA said, "both the decline in 2024 and the increase in 2025 are largely explained by projected changes in planted acreage." Farmers are expected to spend $1.1 billion, or 4.2%, more on seed, totaling $27.7 billion.

You can find USDA's complete report here: https://www.ers.usda.gov/…

Katie Dehlinger can be reached at Katie.Dehlinger@dtn.com

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