The pandemic has turned the farm economy on its head this year. With direct government payments up drastically, net farm income for 2020 is projected to be the highest it’s been since 2013, according to a Dec. 2 Farm Income Forecast from the U.S. Department of Agriculture’s Economic Research Service.
Net farm income is forecasted to reach $119.6 billion, an increase of about 43% from 2019, and, factoring in inflation adjustments, 32% above the 2000-2019 average of $90.6. This report is a stark contrast to the first 2020 Farm Income Forecast in February, which predicted that net farm income would increase by only a few percentage points.
Net farm income is the total income of a farm, including payments from government programs, minus the farm’s expenses. This includes both cash and noncash income and expenses.
Net cash farm income, which is a more precise measurement that only includes cash income and expenses, is expected to increase by about 22.6% to $134.1 billion.
Payments from government programs are a big piece of the pie. Direct federal aid for farmers and ranchers this year is expected to reach $46.5 billion, about a 107% increase from 2019, due partly to COVID-19 relief funds.
This is all a big change from the Farm Income Forecast in February this year, before the pandemic hit hard in the U.S. At that point, economists were forecasting that net farm income would increase only by 3.3%, and net farm cash income would decrease by 9%. Direct government payments were also expected to decline by about 37%.
Despite the increases in net farm and net cash income, total cash receipts across all commodities are expected to decrease by just under 1%, down to $366.5 billion.
Total animal and animal product receipts could decrease by 5.5%, with declines in broilers, hogs and cattle. Total crop receipts could increase by 3.3%, with higher receipts from fruits, nuts and soybeans making up for lower corn and cotton receipts.
Total median farm household income is projected to increase for the second year in a row, countering several years of declining median farm household income from 2015 to 2018. After inflation adjustments, the forecasted increase this year is about 3.5%. This includes both on farm and off farm income.
This year, median off farm income for farm households could decrease by 1.5%, due to lost jobs and wages, but median on farm income could increase $1,187 from $297 in 2019. While neither of those numbers sound huge, that’s a drastic flip from 1996 through 2018, when the median farm income for farm households was negative.
Total production expenses are forecast to decrease by 2.7%, when taking inflation into account. The declines come from interest expenses, livestock and poultry purchases and oil and fuel expenses, with increases expected on fertilizer and net rent to landlords.
Farm debt is forecasted to increase by 4%. In a Dec. 2 webinar on the forecast, Carrie Litkowski, senior economist with the Economic Research Service, said increases in farm income do not always mean that farm debt will go down. Some farmers may use increased income to make improvements on the farm, or put it in the bank.
“It’s not a given that they’ll use it to pay down debt, especially when interest rates are low,” she said.
Factoring in inflation adjustments, farm assets and farm sector equity remain relatively unchanged.
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