Farm expenses have seen significant changes in 2024, with labor and taxes leading the increase. While some costs like feed, fertilizer, and pesticides are expected to decrease, others, particularly related to labor, property taxes, and livestock purchases, have risen sharply. These increases come at a time when farmers are already facing declining income due to a weaker agricultural market.
Labor costs for farmers are projected to climb 6% by the end of 2024, reaching $51.8 billion, marking a significant increase over the previous year. This rise in labor expenses includes both cash and non-cash employee compensation. Labor has become an increasingly important cost for farmers, especially given the tight labor market and the rising demand for workers in agriculture.
Similarly, costs for livestock and poultry are also set to see a substantial increase. In 2024, these purchases are expected to grow by 10%, totaling $47.4 billion. This increase represents the largest dollar rise in farm expenses relative to last year. Livestock and poultry costs are driven by factors such as supply chain issues, increased demand for protein products, and the costs associated with breeding and maintaining livestock.
Interest costs have also risen in 2024, climbing by $1.3 billion, although there is hope that this trend may reverse in the coming year. The Internal Revenue Service (IRS) suggests that interest expenses might start to decline in 2025, which could provide some relief to farmers burdened with high debt. While rent costs remained relatively stable, property tax expenses have seen a significant rise, increasing by nearly $2 billion. The increase in property taxes reflects a broader trend in rising local and state government fees, which have become a growing concern for farmers operating on tight margins.
Despite these rising costs in several areas, overall farm expenses are expected to decrease in 2024. The U.S. Department of Agriculture (USDA) projects a nearly 2% drop in total farm expenses for the year, bringing the total to $453.9 billion. This decrease is largely due to falling prices for feed, fertilizers, pesticides, and fuel. The cost of feed, which is typically the largest expense for farmers, is forecasted to drop 13%, to $69.5 billion, easing some of the financial pressure on farmers who rely heavily on feed for their livestock.
While the reduction in certain input costs may offer some relief, the financial outlook for farmers remains challenging. The USDA has projected a $9.5 billion decline in net farm income, marking a 6% decrease when adjusted for inflation. This decline in income is compounded by a reduction in direct government farm program payments. Programs like the Dairy Margin Coverage Program and disaster assistance have seen lower payments in 2024 compared to the previous year, further straining farmers’ finances. These reduced payments come at a time when farmers are already grappling with market volatility and low commodity prices.
The challenges faced by the agricultural sector have sparked calls for action from lawmakers. As part of efforts to stabilize the sector, a new farm bill is being debated in Congress. However, progress on the bill has been slow due to infighting between Democrats and Republicans, which has delayed the passage of measures that could provide financial relief to farmers. Some lawmakers have stressed the urgent need for immediate action to prevent a full-blown crisis in the farm economy. They argue that failure to address the issues now will only make the situation more costly to fix in the future.
The current economic climate underscores the vulnerability of farmers in the face of rising costs and fluctuating markets. While lower feed, fertilizer, and pesticide prices may help reduce some costs, other expenses such as labor, taxes, and livestock purchases are putting a strain on farmers’ profitability. With declining farm income and reduced government support, many farmers are struggling to maintain their operations. The agricultural sector’s financial challenges highlight the importance of timely government intervention and stable policies to support the industry and ensure its long-term sustainability.
