The USDA says farm sector production expenses, including those associated with operator dwellings, are forecast to decrease by $4.6 billion to $344.2 billion in 2020 in nominal terms, which means not adjusted for inflation. That’s a 1.3 percent drop from the previous year.
These expenses represent the costs of all inputs used to produce farm commodities and strongly affect farm profitability. Although the overall production expenses are projected to drop, there are differences between the specific expenses. Specific expenses forecast to increase in 2020 account for approximately 69 percent of the total and are projected to collectively rise by $6 billion relative to 2019 before inflation adjustment.
These include the two largest categories; feed purchases and cash labor. In contrast, expenses expected to decrease account for 31 percent of total expenses and are forecast to collectively decline by $10.6 billion between 2019 and 2020. More specifically, livestock and poultry purchases are expected to drop 7.5 percent, pesticides by 2.1 percent, and oil and fuel spending by 13.9 percent.
Interest-rate costs are forecast to be at their lowest level since 2014, dropping by 27 percent from 2019 as a result of historically low interest rates.