China’s Covid-19 rebound and elevated crop prices are poised to make 2023 another potent year for US agriculture. US net farm 2022 income reached its highest level since 1973 (adjusting for inflation). Corn and wheat prices skyrocketed after the Russian invasion of Ukraine with some regions noting up to a 19% jump from 2021. This is encouraging news for farming, but high inflation has also increased grocery prices for the rest of the economy. 

Demand for livestock feed, vegetable oils, and crops (according to grain-trading middlemen Bunge Ltd. and Archer Daniels Midland Co) is expected to remain strong this year. As China continues to open up, imports will naturally rise and keep US farm coffers flush with revenue. Bunge and Archer Daniels Midland generally perform well in the face of trade volatility and crop shortages in other parts of the world. ADM registered an impressive 2022 profit jump of 60% (compared to 2021) and Bunge just reported an 8% increase in earnings for the year. 

Meanwhile, grain exports have been slowly trickling out of Ukraine’s Black Sea ports. This was part of a larger export deal with Russia. While touted as an olive branch of sorts, US Department of Agriculture data notes that the level of exports is still far off from pre-war/Covid times. China’s pent-up demand is very similar to what occurred in the US in 2022. As the country opens Archer Daniels Midland expects a boom in demand for soybean oil and livestock feed for biofuels. Yet, prognostications are fragile as geopolitical tensions, especially around Taiwan, could derail any short-term gains. 

With high grain prices, farmers are expected to augment planting throughout 2023. Farm Progress, a research arm of Informa, anticipates corn acres surpassing 90 million for the year. This would be a 2% increase over last year. Another variable to keep an eye on, however, is weather changes. Multiple years of drought-like conditions have nudged wheat and hay prices higher. Yet, the winter did bring strong precipitation and snow in western US states. 

Net farm income is projected to hit $137 billion in 2023. To put this in perspective, the 20-year farm income average has been $108 billion (adjusted for inflation). $137 billion is a great year, but still down slightly from one of the largest farm net income years – 2021 at $141 billion.    

2022 was a very good year for the agriculture industry and despite incomes facing a slim downward trajectory, expect 2023 to be another boom for US agriculture.