In early September, the United States Department of Agriculture released the latest "2025 Farm Income Forecast," which appeared to show some very positive prospects for U.S. farm income.

However, as you drill deeper into the latest USDA data, there are some reasons for concern in certain segments of the agricultural economy. This is especially true for segments involved in crop production.

According to the latest U.S. farm income report released by the USDA Economic Research Service, U.S. net farm income is expected to increase by nearly $52 billion or over 40% from 2024 farm income levels. The 2025 net farm income is now estimated at $179.8 billion, which would be the second-highest net farm income ever, trailing only the record net farm income of $186 billion in 2022. The biggest difference in the two years is that the 2022 record farm income was largely due to high crop commodity prices, modest crop expenses and very strong crop profit margins, while the projected strong 2025 profits are mainly due to profitability of livestock production and large levels of government farm program payments.

In the recent farm income report, USDA estimated total U.S. net cash income for 2025 at $180.7 billion, which is an increase of $36.5 billion or 25% from a year earlier. Net cash income includes cash receipts from all farm-related income, including government payments, minus cash expenses for the year. Net farm income is accrual-based, which includes adjustments in the cash income for changes in inventories, depreciation, and rental income. Generally, net farm income is a truer measure of overall profitability in the farm sector.

The following are some observations from the latest USDA 2025 Farm Income report:

• Overall, 2025 cash receipts for all commodities on U.S. farms are estimated at $535.2 billion, which is an increase of $24 billion or 4.7% compared to 2024.
• Total 2025 crop receipts are estimated at $236.6 billion, representing an expected decrease of $6.1 billion or 2.5% below 2024 levels, which followed a decrease of $16.7 billion from 2023 levels a year earlier. The decline in crop receipts is primarily due to an anticipated decrease in cash receipts from corn and soybeans in 2025, which are expected to decline by nearly $15 billion for corn and by nearly $13 billion for soybeans in the past two years from 2023 levels. This decline is largely due to the significant drop in commodity prices in the past two years. Receipts from other crops in 2025 are expected to remain fairly steady, with only minor adjustments from 2024 and 2023 levels.
• Total cash receipts and profitability from livestock production in 2025 is largely responsible for the improved 2025 overall U.S. farm income projections. Total livestock receipts are estimated at near $239.8 billion and are expected to increase by $30.6 billion or 11.2% from a year earlier. This is due to higher projected total receipts from cattle, hogs, turkeys and poultry production as compared to a year earlier. Receipts from cattle sales in 2025 showed the largest increase, with total receipts expected to increase by $17.5 billion or 16%, compared to a year earlier, reflecting the record cattle prices this year. Other 2025 increases in cash receipts compared to 2024 included hogs with an increase of $2.6 billion or 9.5%, turkeys at $1.1 billion, and chicken and eggs at $10 billion. Receipts from milk and dairy products is to decline slightly in 2025, compared to a year earlier.
• Total farm expenses are estimated at $467.5 billion in 2025, which is an increase $11.9 billion or 2.6% from 2024. This follows an increase of $16.7 billion in 2024 as compared to a year earlier. With the exception of purchased feeder cattle, most 2025 farm expenses for crop inputs, land rent, labor, supplies, and operating interest are fairly stable with a year earlier, when adjusted for inflation. The continued higher level of crop input costs, together with lower commodity prices, points to the negative profit margins facing crop producers in 2025. On the other hand, the low commodity prices have reduced feed costs, resulting in improved profitability in livestock production in the past 12 months.
• The significance of government payments on net farm income and net cash income levels is expected to increase dramatically in 2025, due to a combination of one-time 2024 economic assistance payments, 2023 and 2024 disaster assistance payments, and large 2024 regular farm program payments in some sectors, along with regular CRP, dairy margin coverage, and other traditional government payments. The estimated direct government payments to be paid to farmers in 2025 is estimated at $40.5 billion, which would represent an increase of $29.6 billion or over 300% from 2024 levels. The 2025 government farm payments would be the second-highest level in the past few decades, trailing only the $46 billion that were paid out in 2020. The high payment level in 2020 resulting from large ad hoc support payments due to COVID and the China trade war. The projected government payments in the USDA report do not include receipts from crop insurance indemnity payments or marketing assistance loans on grain, which are included in the crop receipts.
• The nominal value of all U.S. farm assets is expected to increase by 4.7% or nearly $200 billion in 2025, raising the total value of U.S. farm assets to approximately $4.4 trillion. Eighty-two percent or just over $3.6 trillion of the total assets comes from the value of farm real estate, which has increased dramatically in some portions of the U.S. in recent years. Farm real estate values in the U.S. increased by approximately 4.5% in 2024 and are expected to increase by another 4% in 2025.
• Even though total U.S. farm debt is relatively low, it should be noted that total farm debt in 2025 is expected to increase by 5% or about $28.3 billion compared to a year earlier, raising the total U.S. farm debt to $591.8 billion. Of that debt total, 65% is made up of real estate debt, with the balance from other farm loans. The total debt for non-real estate loans, which are primarily farm operating loans increased 5% or $9.6 billion in 2025 compared to a year earlier. It should be noted that non-real estate debt has increased by almost $53 billion or 35% since 2020.
• The overall farm sector debt-to-asset ratio is projected to remain relatively low at 13.4% at the end of 2025; however, this ratio has been increasing slightly in the past three years. The debt-to-equity ratio at the end of 2025 is estimated to be at 15.47%, which would represent a small increase from 2024 levels. Current debt-to-equity ratios are still well below the record high ratio of 22.2% in 1985.

The U.S. net farm income projections show some dramatic improvements in 2025 as compared to 2024 levels, and would be comparable to the record net farm income level in 2022. The very high net farm income levels from 2021 to 2023 were primarily driven by some of the highest crop prices in the past decade, along with very manageable farm production expenses and low interest rates. The near record projected farm income for 2025 would be the result of record cattle prices, strong livestock profitability, and a very high level of government farm program payments. The projected crop receipts for 2025 are actually the lowest in recent years and predicted overall profit margins for crop production this year are the poorest since the 2016-2020 period. The expected above-average 2025 corn and soybean yields in many areas of the upper Midwest will certainly help soften the potential negative profit margins for farm operators in those areas.

There are certainly some "yellow caution flags" in net farm income and profitability levels revealed in the latest USDA farm income report for the U.S. farm sector as we look ahead to 2026. A big key going forward will be if we see some improvement in crop prices following the 2025 harvest season. This will likely depend on the level of U.S. demand and consumption, as well as the strength of U.S. export markets to China, Mexico, Canada, and other countries. Another key to farm profitability in 2026 will be what impact potential tariffs have on farm production expenses, as well as the future direction of land costs, and interest rates during the coming year. In addition, it will be interesting what impact the added "safety-net" provisions in the One Big Beautiful Bill" have on the U.S. net farm income levels in future years.