WEST LAFAYETTE, Ind. – Farm machinery expenditures were up in 2023 over 2022, but a Purdue University agricultural economics professor doesn’t expect that to continue in the next couple years. Overall, total farm production expenditures nationwide rose 6.5 percent in 2023, according to the USDA’s latest annual expenditures report.

Nationally, farm equipment expenditures for tractors and self-propelled machinery were $18.9 billion in 2023, up from 2022’s $18.7 billion. In the Hoosier state, tractor and self-propelled machinery expenditures were $750 million last year, up from $520 million. The report was released July 26.

Michael Langemeier, also associate director of Purdue’s Center for Commercial Agriculture, told Farm World the increase in machinery and capital purchase expenditures wasn’t unexpected.

“Coming off 2021 and 2022, they were very good years with strong liquidity, so people were using some of that liquidity to replace machinery and perhaps even build grain bins and shops and those kinds of things,” he explained. “So usually when you have strong liquidity you do see stronger capital purchases, so that wasn’t very surprising.

“I think (machinery) purchases are going to be down substantially in 2024. 2024 is going to be a really tough margin year and the reason for that is the input costs are still relatively high coming out of COVID and the prices are down substantially from what they were the last three years. So, you’re going to see a fairly large drop in capital purchases and here I’m talking primarily machinery, grain bins and buildings, and excluding land.”

Farmers do still have pretty strong balance sheets, but “farms are hanging on to that liquidity that they garnered the last two-three years to make it through relatively tough cash flow years, specifically 2024,” Langemeier said.

Nationwide total farm production expenditures were estimated at $481.9 billion last year, up from $452.5 billion in 2022, according to the USDA’s National Agricultural Statistics Service (NASS). In 2023, average expenditures per farm were $255,047 nationwide, up 12.4 percent from $226,885 in 2022.

Nationally, the four largest expenditures totaled $238.7 billion and accounted for 49.6 percent of total expenditures in 2023. Feed accounted for 16.6 percent of the total; livestock, poultry and related expenses, 11.6 percent; farm services, 11.3 percent; and labor, 10.1 percent.

The Midwest region (Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio and Wisconsin) contributed the most to U.S. total expenditures with expenses of $151.2 billion (31.4 percent), up from $144.6 billion in 2022, NASS said.

The fact that farmers have to pay more for some inputs adds stress, Langemeier noted. “High input costs have been the biggest concern of producers in the (Purdue University/CME Group) Ag Economy Barometer for months,” he said. “The problem we have now is we’ve got these high input prices with substantially lower crop prices and so that’s just your classic margin squeeze. I’m not going to paint this as a pretty picture, but 2024 does not look very good. Every time I turn around, it seems like the prices are weakening.

“If (current) crops are above trend, which seems like they might be at least trend or maybe slightly above at this point, if that happens, crop prices aren’t going to improve. And we’re looking at some pretty low net returns for crop producers.”

Livestock producers could benefit from the situation, though, because they’ve had some pretty high feed costs the last two-three years, Langemeier said. The NASS report showed feed expenditures nationwide were down, which isn’t surprising because corn prices started to fall toward the end of 2023 and into 2024, he said.

There may be some things farmers can do to help mitigate the rise in expenditures, he said.

“I’m not saying you necessarily can cut (fertilizer and chemicals) but this is a time to evaluate your program. Am I using the appropriate herbicide program? Am I using the appropriate mix of fertilizer? Anything I can do there to economize. Those costs have risen. They increased rather sharply during COVID – we had logistic problems – and those costs are still relatively high. Fertilizer has come down but it’s still relatively high compared to what it was 10 years ago.”

As for 2024, Langemeier said he expects to see declines in fertilizer and chemicals, along with feed. He also expects capital expenditures to be down.

The expenditures report doesn’t list estimates for every state. In Farm World’s primary readership area, only Illinois, Indiana and Iowa were listed separately.

In Indiana, total farm production expenditures for 2023 were $13.7 billion, up from $13.5 billion. The average expenditures per farm were $256,942, up from $247,172 in 2022. Expenditures that rose included livestock, poultry and related expenses; labor, and seeds and plants. Decreases included feed, rent, agricultural chemicals and miscellaneous capital expenses.

Nathanial Warenski, Indiana state statistician for the NASS Great Lakes Region, told Farm World that economically, it was expected prices would rise.

“The biggest expenditures were labor and tractors and other self-propelled machinery,” he said. “Various expenditures did drop, with nine of expenditure categories seeing a decline for Indiana. There (was) much talk of low commodity prices and high input prices. The expenses I hear discussed a lot are included in price drops. Some of the drop may be related to conservation efforts (fuel, fertilizer, chemicals).”

In Illinois, total production expenditures were $23.1 billion, up from $22.9 billion in 2022. Average expenditures per farm were $329,815 last year, up from $323,550.

Iowa’s total production expenditures were $37.9 billion, up from $35.2 billion in 2022. Average expenditures per farm were $439,166 in 2023, up from $414,723.