Farm input costs are on the rise, land is less available and less affordable, and the added stress has brought little in the way of additional income. Is there an incentive for farmers and ranchers in the Mountain States to continue farming, despite the stress?
On February 7th, the USDA released its latest farm-income data. Nationally, farmers in the Mountain States accounted for 4.9% of the farm related net income. Farmers in the United States as a whole created $140.9 billion in net farm income in 2021. Washington contributed 2.2% and ranked 17th, Idaho contributed 1.3% and ranked 26th. Finishing out the list, Montana ranked 33rd, Utah 37th, and Wyoming 39th.
Net income on a per farm basis is most-recently available from the 2017 agriculture census. On a per farm basis, Idaho ranked 14th and Washington 17th (for net farm income per farm). Montana (26th), Wyoming (32nd) and Utah (34th), trailed further behind.
Predictably, the Mountain States account for a higher percentage of production expenses. Farm cash expenses, excluding operator housing, totals $345 billion in the United States. The Mountain States account for 6.4% of national farm expenses. The higher input costs for row and specialty crops are the cause of the shift. On a per farm basis of expenses in 2017, Idaho and Washington ranked 8th and 9th respectively.
Land rents for the Mountain States in 2021 were 5.1% of the national total. Idaho, Washington, and Montana ranked 15th, 16th, and 18th respectively for land costs. Again, the higher value crops play a role in the higher land rents.
Farm incomes are expected to decrease in 2023 for the Mountain States between 12% for parts of Montana, 21% in the Idaho, Utah, and Washington basin and range regions, and 24% for the row and specialty crop regions of Idaho and Washington. A combination of higher production expenses and lower crop prices, will drive the farm economy downward.
In the midst of these challenges, what is the financial incentive to continue farming?
Net cash farm income (NCFI) is a major motivator for continued farm operations. This is the profit of the operation after all expenses are paid, including owner and employee salaries. This value can be used to reduce debt, pay taxes, cover family living expenses, and invest. For many farm families the NCFI is a financial tool that would be unavailable outside of farming operations.
For Idaho this incentive is $52,503 per operation in 2017, and the four other Mountain States followed behind, with Utah the lowest at $19,929. NCFI is a critical tool in increasing the financial stability of farming operations, managing risk for farm families, and incentivizing operations to stay in business.
Farm families have benefited from record levels of NCFI through the pandemic, with 2020, 2021, and 2022 setting records. This year, 2023, will likely see a softening of these numbers. However, NCFI is still predicted to be above the record set in 2021, so farmers will still be able to benefit from this financial tool.
