U.S. Farm Trade Deficit Widens, But Net Farm Income Strong

Two recent news stories from the U.S. Department of Agriculture (USDA) may seem to contradict each other. On the one hand, USDA reports that net farm income was at record levels in 2022. On the other hand, USDA also reports that U.S. agricultural product imports are now exceeding exports by an increasing margin.

Export sales are important to the farm sector, so you might think that a widening farm trade deficit would bode ill for U.S. farmers. However, the latest USDA forecasts suggest that net farm income will decline in 2023, but it will remain well above the levels that prevailed between 2014 and 2019.

There are a few reasons why the U.S. farm trade deficit is increasing while net farm income remains strong. First, the U.S. is a major exporter of four major agricultural products: soybeans, corn, poultry, and pork. In 2022, the U.S. exported $34 billion worth of soybeans, $77 billion worth of corn, $28 billion worth of poultry, and $17 billion worth of pork.

Second, the U.S. imports a lot of processed foods, such as baked goods, cereal, and pasta. In 2022, the U.S. imported $13 billion worth of processed foods. The U.S. also imports a lot of alcoholic beverages, such as distilled spirits and wine.

Finally, the U.S. imports a lot of fruits and vegetables that are not grown in the U.S., such as bananas, cocoa, and coffee.

The balance of trade affects the health of the U.S. farm sector and of the broader U.S. economy. However, the story is a bit more complicated than one might guess. It is possible to have a relatively healthy farm economy despite an agricultural trade deficit.

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