Episode 70 - The 2025 Arkansas State Net Farm Income Projection is Adjusted $850 Million Downward in its Fall Revision

Arkansas’s 2025 net farm income was revised down by $850 million, and in this episode Hunter Biram and Ryan Loy break down what’s driving the shift. Wet spring conditions cut rice and soybean acres, delayed and smaller disaster payments pulled income even lower, and only modest livestock gains helped offset the decline. They also look ahead to 2026, where most crop margins remain negative, but updated safety-net provisions offer a bit more stability for soybeans, corn, and peanuts. 

Transcript

00;00;00;18 - 00;00;29;12
Dr. Hunter Biram
Arkansas’ projected 2025 net farm income fell 23%, largely because of lower crop receipts and reduced government support tied to delayed or smaller disaster payments. Where conditions in the spring of 2025 led to a half million acre reduction in planted acres, especially in rice and soybeans, contributing to a $617 million drop in crop receipts. And for 2026, the following year shows little improvement, with persistent negative margins for most crops, though soybeans, corn and peanuts may perform slightly better under updated farm safety net

00;00;29;12 - 00;00;43;13
Dr. Hunter Biram
provisions in the one big, beautiful bill act. That, and so much more. On this episode of Morning Coffee and Ag Markets.

00;00;43;16 - 00;00;49;11
Dr. Hunter Biram
Well, I'm your host today, Hunter Biram. And, I've got Ryan Loy with me. Ryan, how are you?

00;00;49;11 - 00;00;50;22
Dr. Ryan Loy
Doing well, Hunter, about yourself?

00;00;50;24 - 00;00;51;23
Dr. Hunter Biram
It's good to see you. It's been

00;00;51;23 - 00;01;03;28
Dr. Ryan Loy
a while. I know it's been. It's been a while. Both you and I have been running around like crazy. I've been helping on the search committee for a new animal science position. I know you've been traveling with conferences and family and everything in between, so it's been a busy time.

00;01;04;00 - 00;01;06;04
Dr. Hunter Biram
It has been. I don't think I've seen you since Halloween.

00;01;06;09 - 00;01;16;00
Dr. Ryan Loy
I think that's right. No I think the last time I saw you was [...] Left North Carolina and then, came back and you went to Disney. Yeah, that was it.

00;01;16;00 - 00;01;17;20
Dr. Hunter Biram
Took some time off. Some much needed time off.

00;01;17;20 - 00;01;18;27
Dr. Ryan Loy
Oh I bet I bet.

00;01;19;00 - 00;01;44;09
Dr. Hunter Biram
So that was really good. So folks this is actually episode number 70. It really kind of hit me hard for some reason, I don’t know why the number 70 did, but 70 sounds like a pretty big number. But this is episode 70 of the podcast, and what we're gonna talk about today is a fall revision to the spring projection that we put out with the Rule and Farm Finance Policy Analysis Center on Arkansas state level net farm income.

00;01;44;09 - 00;02;07;23
Dr. Hunter Biram
That's a mouthful because it is a mouthful. There's a lot of things to talk about. What I found the most interesting about this revision, as we were working on it with our colleagues at the University of Missouri. Is this almost $1 billion downward revision. Right. Because if you remember, there was a lot of controversy around all these net farm income numbers, not just from Arkansas, but like from USDA as well, because a lot of that from income projections were upward.

00;02;07;25 - 00;02;29;13
Dr. Hunter Biram
And, of course, we had to say, yeah, but you know, with that in in stress a really big but on that, because, I mean, I think Nebraska had like a 55% increase or 50% increase, we were showing a 22% increase. And, you know, a lot of that was going to be driven by, yes, the ad hoc government assistance and also livestock was dropping a bunch of that.

00;02;29;16 - 00;02;48;16
Dr. Hunter Biram
And so we had to, to, to temper that. And so now though, now that we've gone through the year for the most part, and accounting for 2025, net from income, as we know, the projection is just a projection. Joe Parcell at Kansas State, like you would say, it's a projection, folks. Like we're not guaranteeing anything. We're just giving you an idea.

00;02;48;18 - 00;03;15;25
Dr. Hunter Biram
And so that's what we did. We gave people an idea. Well, what did we not have on our bingo card? Three months worth of rain in about three days. That's right. Knocking out a bunch of potential planted acres, mostly in rice and soybeans. And so because of that, large reductions in the receipts for rice and soybeans, I think that's going to be about over $600 million, over half $1 billion reduction in receipts from the lost, value of production on rice and soybeans.

00;03;15;28 - 00;03;31;26
Dr. Hunter Biram
I think cotton might have also had a reduction. I believe so. We've had a reduction just slightly. But because of all that rain, we had this reduction where not only on the receipt side of things, we also had a reduction on, the government assistance side of things. We just didn't get as much money as we had projected.

00;03;31;26 - 00;03;49;03
Dr. Hunter Biram
I think a lot of that was driven by just the timing of the payments, the government shutdown. Right. That's definitely playing into this now. But also the fact that the payment rate, I think, was a little bit lower, actually a lot lower than what we had anticipated with the supplemental disaster relief program. The ECAP money came in and we we accounted for that.

00;03;49;03 - 00;04;07;28
Dr. Hunter Biram
That was pretty much spot on. We knew what was coming. SDRP, whenever they first released the language. The payment rate was a little bit higher, and then it came in a little bit lower. And so with that downward revision in the ad hoc and disaster assistance line item in the, Arkansas farm income number paired with the decline in the receipts, and we got almost a $1 billion downward revision.

00;04;08;01 - 00;04;11;22
Dr. Hunter Biram
That’s right. So now we're showing a decline in farm income, not an increase.

00;04;11;22 - 00;04;27;17
Dr. Ryan Loy
That's right. And that was I know, you know, with you, you know, taking questions from the media and some of the reporters or even farmers, you know, looking at we all know how bad it is out there. And we could see it for our own eyes, but at the same time, we were like, well, on paper, net farm income is going up.

00;04;27;17 - 00;04;44;09
Dr. Ryan Loy
Right? So yeah, tamper those down, especially on the row crop side, you know, which is what you and I deal with mostly, being offset by some of those higher livestock receipts, but also the governmental assistance. And so while it's not, you know, good is not the word in terms of the downward revision, but it's more realistic.

00;04;44;09 - 00;04;50;21
Dr. Ryan Loy
We have more data behind us, and we have better idea in terms of the exact, you know, what that farm incomes looking like for Arkansas this year.

00;04;50;24 - 00;05;00;21
Dr. Hunter Biram
That's right. And Ryan, you know, we've talked about receipts. We've talked about government assistance. Can you hit us with some production expenses and more on the other side of that sheet?

00;05;00;23 - 00;05;22;16
Dr. Ryan Loy
Yeah. So what I did is I went and looked at what they're projecting, you know, what they have for this year now and what they're projecting into next year. I thought that would be at least interesting in terms of a change. And I just want to highlight really three categories across the production expenses side. And if anybody wants to look at more of the line items in terms of the production expenses, if, we'll link it in this week's newsletter.

00;05;22;18 - 00;05;42;25
Dr. Ryan Loy
University of Missouri has this on the website. Both the data set that they pull their numbers from and they project from. And our report will link both of those. And you can go in there and look for yourself. But one thing that stuck out to me that I thought was interesting was fertilizer expenses. You know, right now across the state, they're looking at about $602 million, you know, across the state.

00;05;43;00 - 00;06;02;05
Dr. Ryan Loy
But when you look into 2026, that's projected to increase by 38 million year over year. I mean, that's a significant increase. And, you know, I think we're looking at a lot of supply chain hiccups that are still going to be working themselves out by that time. You know, again, when we're looking at the cost of importing things that's uncertain at this time.

00;06;02;05 - 00;06;33;20
Dr. Ryan Loy
And this could be revised downward significantly by the time, you know, perhaps at all, you know, trade war disruptions or supply chain disruptions from not even just the trade war can work themselves out before them. But when we're looking at already crop prices that are low and we I know we've seen a rally in the soybean market here as of late, but still, that increase in expense overall is going to really be significant when you're looking at even the highest price that soybeans reach, which is probably, what, $11.15 per bushel somewhere around there.

00;06;33;27 - 00;06;56;17
Dr. Ryan Loy
I mean, that would still be difficult to pencil if you're expecting over across the state of $38 million increase year over year, the more important comparison, or the more interesting comparison, I thought was looking at what we had, put for 2023, which again, when we're thinking back to 2023, that was probably some of the highest, fertilizer prices due to the Russian Ukraine war and those supply chain disruptions.

00;06;56;19 - 00;07;15;29
Dr. Ryan Loy
And we're projected for next year to have 10 million more. Right? It was 630 million 2023 projected at 640 million next year. So it's going to be interesting to see how that number plays out. But in 2025, numbers a little bit up from 2024 but down from 2023. But it looks like we're going to kind of uptick back next year.

00;07;16;01 - 00;07;33;27
Dr. Ryan Loy
Another one that I thought was very interesting was the labor expenses, which we all know labor is a you know, labor is a problem. It's very expensive, difficult to find, hard to keep, and very expensive on both a long term investment in a short term investment. And since 2023, you know, the number in 2023 of 378 million across the state.

00;07;34;00 - 00;08;01;03
Dr. Ryan Loy
And the number projected for 2026 is 448 million. That would equate to a $70 million increase since 2023 that you want to talk about significant? That blows the fertilizer prices out of the water when you're looking at that. And I don't know if that's more due to availability or the investments that have to be made. You know, maybe some of the H-2a program policies, if those are increased in price, that I'm not sure of, it may just be an availability, a supply issue.

00;08;01;05 - 00;08;17;12
Dr. Ryan Loy
But last thing I want to highlight is in good news, one of the things because I would like to pick up some good news every once in a while here is when we're looking at the interest expenses on both the short term and the intermediate, and the longer term notes, there's going to be a significant decline of about 24 million year over year.

00;08;17;12 - 00;08;36;02
Dr. Ryan Loy
So, you know, there's interest expenses may offset some of those labor increases and fertilizer increases, but not by much. But pointing to one good thing, it looks like that will maintain and keep going down. Hopefully in the next year. And so overall expenses because of that have declined by less than a percentage point one percentage point year over year.

00;08;36;02 - 00;08;51;28
Dr. Ryan Loy
When you kind of take everything into account. And I mean, I would say it's relatively unchanged. You're looking at a, you know, a decline of 0.17% year over year. So really unchanged. But there's different costs. You know, different expense categories that are going to be going higher, while some are going to go lower this next year.

00;08;51;28 - 00;08;55;19
Dr. Hunter Biram
And when you say unchanged do you mean 2025 relative to 2024?

00;08;55;22 - 00;09;12;24
Dr. Ryan Loy
Yes. Thank you very much. I'm sorry. I should be much more specific about that. 2025 to 2026 is the expectation. So going into next year, right now, we're going to decline in terms of expenses from where we're at right now to the projection of next year. And again, like you said, and I'm glad you said that. It's just a projection, right?

00;09;12;24 - 00;09;18;01
Dr. Ryan Loy
We know we can't guarantee anything of that happening. But it's interesting to see that, year over year.

00;09;18;03 - 00;09;35;28
Dr. Hunter Biram
Yeah. So talking and speaking of 2026, then, I mean, we've released our crop enterprise budgets. We have a link in the newsletter to those, for 2026 that's released, I think, on the 2nd of November. So those are hot off the presses, folks. Encourage y’all to go check those out. You know, in terms of, returns, let's just say that they're better relative to 2025.

00;09;35;28 - 00;09;55;11
Dr. Hunter Biram
But let's all be honest, 2025 was not a good, was not a good year. And so it's like it's that old saying like you can only go up from here. But here's the deal folks. Like we're going to go up, but not by near enough. I mean, I wish I could say that's going to be tremendously better. And everyone's making money, you know that and that we've taken our licks this year and that we're going to get better next year.

00;09;55;11 - 00;10;21;11
Dr. Hunter Biram
But that's just not how the markets work. And so right now we're looking at negative returns across the board except for peanuts. So I mean hey if you have the infrastructure, if you got the equipment, if you got the relationships, if you know, if you've ever thought about dabbling in peanuts and you can do it, this is the year to be thinking about that because you're looking at even with a 75/25 rental agreement, returns of about $100 an acre, you know, the next best crop, then is soybeans, and that's at -$3 an acre.

00;10;21;11 - 00;10;39;09
Dr. Hunter Biram
That's right. Essentially break even with current market price projections. I believe corn is sitting at about negative like 130. You know, I think, rice and cotton, are even worse than that. And so with that in mind, I mean, I would I'm going to expect that we're going to start to see folks thinking more about soybeans.

00;10;39;09 - 00;10;55;09
Dr. Hunter Biram
I mean, we have the trade deal now, right? So we've got the trade deal, you know, it is, better than what we had, that's for sure. And so the markets responded. And, you know, now you're looking at a little over $11 a bushel for soybeans versus like $10, which is kind of where we were where we were sitting.

00;10;55;09 - 00;11;11;20
Dr. Hunter Biram
So that really helps things out a lot. You know, soybeans doesn't require nitrogen, you know, they're nitrogen fixers. And so you don't have that line item. And so I think we're going to see a lot more soybeans next year. Corn we'll probably start to see an increase of price a little bit more corn even though it's not great. It's it's I'm not gonna say the least bad.

00;11;11;20 - 00;11;19;09
Dr. Hunter Biram
It's the next least bad. You know, speaking in terms of comparative advantage. And then, man, you got rice and cotton that are just really struggling.

00;11;19;11 - 00;11;25;25
Dr. Ryan Loy
Yeah, like I was saying last week that looking at the cash price for rice, it's stuck. Art was making me sweat. I mean, it was really.

00;11;25;27 - 00;11;27;02
Dr. Hunter Biram
It was like 480 a bushel.

00;11;27;02 - 00;11;28;10
Dr. Ryan Loy
It was ridiculous. Yeah.

00;11;28;11 - 00;11;29;07
Dr. Hunter Biram
It was. Yeah. Do anything.

00;11;29;07 - 00;11;47;02
Dr. Ryan Loy
You know, I mean you can't you cannot. And so it's that's bad and I'm, I'm really curious to see how that will play out. You know, the world market there not to get into a trade discussion, but when you get high supplies on the world market and with the Philippines extending their import ban, you know, it's there's not a whole lot of good news on that front.

00;11;47;02 - 00;11;55;27
Dr. Hunter Biram
And I mean, we're really just trying to compete globally. Right? So like we just continue to knock down that export price and then that gets passed on to the farm gate. And we just can't compete.

00;11;55;27 - 00;12;17;21
Dr. Ryan Loy
No, it's difficult. But in good news, it's good to see that at least we've got some upside potential in the soybean market. And, when you say, you know, when you look at it, peanuts and soybeans are the ones, and then you've got the rest of those crops that are very input intensive. And if you're looking at what we talked about earlier on the fertilizer and labor expense side, right, you can see that that is really that input side driven in terms of margins.

00;12;17;23 - 00;12;41;15
Dr. Hunter Biram
Yeah, absolutely. And one thing that I also want to talk about with 2026 is that will be the year in which folks will receive their 2025 one big beautiful bill payments with the new farm safety net. So your ARC and PLC from ‘25, which just about everything's triggering unsurprisingly. And so there'll be some healthy government assistance come out to help folks secure, loans, pay off loans.

00;12;41;18 - 00;12;59;25
Dr. Hunter Biram
But will it be in the right amount of time? That's another question for another podcast. But we are projecting that there's going to be about $477 million and PLC and ARC payments that will be distributed in 2026 for Arkansas, you know, which is going to more than offset a $388 million decline and ad hoc and supplemental disaster

00;12;59;27 - 00;13;21;28
Dr. Hunter Biram
And so, you know, there's there's talk of will we have an ad hoc package like ECAP you know, like we did in 2025? Will we get that in 2026 as well? That's a that's a possibility that's sitting out there right now with our projection. We don't account for those things. We don't project policy. We just project when the current markets and current policy is that that's a... I'm stealing that from USDA because that's what they say.

00;13;22;05 - 00;13;31;24
Dr. Hunter Biram
And that's true. I think that's a very healthy approach to making these kinds of projections, because there's just so much political uncertainty right now. So yeah, lot of changes, big change $850 million.

00;13;31;24 - 00;13;33;19
Dr. Ryan Loy
That’s a significant change.

00;13;33;26 - 00;13;43;01
Dr. Hunter Biram
You're seeing a graph that goes up to now it's going down. That's right. Which to me makes more sense and falls more in line with what with what we've been hearing in the field.

00;13;43;02 - 00;13;55;06
Dr. Ryan Loy
That's right. And what our expectations are in terms of, you know, looking at the markets, looking at everything else, like you said, in the field, it makes a lot more sense. Not that we're happy that there's a downward revision, but I think it's more realistic in terms of what's going on the ground.

00;13;55;08 - 00;14;19;05
Dr. Hunter Biram
I do want to make a few notes on, livestock. I'm not going to go into great detail. Our livestock expert is James Mitchell. But he but he has passed along some comments that are worth noting. And so livestock receipts are actually going to increase by 0.43 billion. That's an upward revision as well. This is going to be supported by higher prices, which are expected to drop 24% in 2026, mainly due to easing pressure from the highly pathogenic avian influenza outbreak.

00;14;19;05 - 00;14;34;29
Dr. Hunter Biram
And so that's what the report says. However, our experts here in the department said that the impact, you know, this is Jada Thompson, James Mitchell said the impact from avian flu and egg prices is still up in the air. You know, James says, you know, cash receipts from eggs are lower in 2026 with declining egg prices.

00;14;34;29 - 00;14;54;14
Dr. Hunter Biram
But that estimate should be interpreted with caution because there's still a lot of uncertainty from year to year on losses due to AHPAI. You know, Jada says we have some moderate cases coming in this year, which may indicate another hard HPAI year, but these are still early signs. We don't know the full effects. Egg prices are following

00;14;54;14 - 00;15;25;24
Dr. Hunter Biram
very consistent seasonal patterns for winter effects egg production coupled with seasonal holiday demand. Other livestock receipts or trades in decline by 2%. And, you know, James says, livestock receipts are down on lower cattle sales and higher prices with broader herd rebuilding in the cattle sector expected into 2026. So, a few notes there. You know, we have the, changes in the egg prices, but that should be interpreted with caution because of HPAI, you know, and our experts, James and Jada, they done some great research, peer reviewed research in the department.

00;15;25;25 - 00;15;39;15
Dr. Hunter Biram
So definitely want to defer to them on that. Definitely watch out for the herd rebuilding. That, you know, will be happening probably in the next 3 or 4 years and the impacts that they'll have to Arkansas on that farm income. So with that, Ryan, any other comments from you?

00;15;39;17 - 00;15;55;13
Dr. Ryan Loy
No, I think that was about it. We kind of covered a lot in a very short time, but it's a lot of good information. If anybody has any questions on these reports, please feel free to reach out anytime. Like I said, we'll link the revision report into our newsletter this week. And the data set, if you want to go and deep dive into it yourself.

00;15;55;16 - 00;16;12;26
Dr. Hunter Biram
Absolutely. Well, Ryan, thanks for joining me today. And, folks, we will have a link to this, this report and the spring release, both of those in the newsletter. And then be on the lookout for a press release from UA Division of Ag, Cooperative Extension Service. And with that, stay tuned for the market report. Thanks.