State-Level Net Farm Income: Not a Boom for Everyone
U.S. farm incomes reached a new record in 2022. Between 2021 and 2023, the USDA’s income estimates reveal the strongest three-year span since the 1940s. With either measure, the recent farm income boom has been significant, if not the highest in most of our careers.
National measures, however, come with the limitation that conditions are rarely uniform across all farms, commodities, or geographies. While this is intuitively known, it’s not always clear just how much variability exists.
Incomes Higher, Almost Everywhere
Unfortunately, the USDA’s state-level data are only available through 2022. Figure 1 shows the recent change in net farm income by comparing 2022 with the 2016-2020 average. For context, the national-level changes shifted from the 2016-2020 average of $94 billion to $189 billion in 2022, a 102% increase.
In nine states, income in 2022 was more than 200% higher than in earlier years. Remember that a 100% increase is a doubling, so these are very large changes. As many might have expected, incomes increased sharply through the Corn Belt and Northern Great Plains. Outside the Midwest, Nevada, West Virginia, and Virginia also posted large gains.
Figure 1 also reveals a case of the haves and have-nots as several states posted small changes, especially in the Southwest and Southeast. Much of this would be attributed to commodity differences. However, differences also emerge in similar regions. For example, incomes were only modestly higher in Nebraska (+62%), Kansas (+32%), and Oklahoma (+34%), while neighboring states posted increases of more than 100%. Some of this may be due to the 2022 drought conditions. Regardless of the sources – weather, commodities, etc. – it’s important to recognize that 2022’s record conditions varied greatly.
Underscoring that variability is Washington, where farm income in 2022 was 24% lower than it was during the 2016-2020 period.
Several Records Unbroken
Another way of considering 2022’s conditions is how inflation-adjusted income compares historically. Figure 2 reports the year each state posted the highest net farm income. These data span several decades, so changes in the underlying commodities produced could play a role.
For 14 states, 2022 set a new state-level record. Again, the Corn Belt stands out as most records were set in 2022 or during the last boom (2011 -2013).
While a few states set records during the 2000s (Oregon, Arizona, Alabama) and even the 1980s (Florida, Rhode Island), several records stand unbroken from the 1970s. Even further back, the late 1940s and early 1950s also established several records, especially in the eastern regions of the country.
Finally, Figure 3 shows 2022 net farm income as a percentage of the record. States shaded in green are those that set new records in 2022 and, therefore, have a value of 100%.
In the Corn Belt, Indiana and Michigan did not set new records in 2022, but conditions were very similar. For other states, 2022 lagged far behind the previous highs. For instance, Nebraska set its record in 2011, but in 2022, incomes were only 68% of the previous high.
The chart also shows how profitable the early 1970s were. In Kansas and Oklahoma, 2022 conditions are a shadow of inflation-adjusted 1973 conditions.
Wrapping It Up
Pulling this data together made us think about the quote, “Rising tides lift all boats.” In this case, the farm boom hasn’t affected each state, region, commodity, or producer the same. While a new national record has been set, earlier records stand for several states. Decades-old records may remain due to shifting production trends or reflect how phenomenal earlier conditions were, such as when wheat prices soared in the 1970s.
A consistent theme across these maps is that the recent farm income boom has been historically significant throughout the Corn Belt. This is consistent with where farmland values have increased the most.