WASHINGTON — A revised outlook of farm financial indicators projected a rise in net farm income for 2020 due to government payments and improved commodity prices, but estimates were not rosy for all sectors.
The U.S. Department of Agriculture’s Economic Research Service projected net farm income, a broad measure of profits, to increase by $36 billion (43.1%) from 2019 to $119.6 billion this year.
“In inflation-adjusted 2020 dollars, net farm income is forecast to increase $35 billion (41.3%) from 2019, increasing for the fourth consecutive year. If realized, net farm income in 2020 in inflation-adjusted terms would be at its highest level since 2013, 32% above its 2000-2019 average of $90.6 billion,” said Carrie Litkowski, USDA ERS economist.
Net cash farm income is forecast to increase $24.7 billion (22.6%) to $134.1 billion in 2020. Inflation-adjusted net cash farm income is projected to increase $23.4 billion (21.1%) from 2019, which would put it at its highest level since 2014 and be 22.5% above its 2000-2019 average ($109.5 billion).
Net cash farm income encompasses cash receipts from farming, as well as farm-related income, including government payments, minus cash expenses. It does not include non-cash items — changes in inventories, economic depreciation and gross imputed rental income of operator dwellings and so forth — reflected in the net farm income measure.
Litkowski noted that both net farm cash income and net farm income “have their uses. I can’t say one is more important than the other. Net farm income is more comprehensive, while net cash farm income gives us an idea of cash flow.”
Total median farm household income is forecast to increase to $86,992 in 2020 from $83,111 in 2019, a nominal increase of 4.7% — a 3.4% increase after adjusting for inflation — in 2020.
The forecasted rise in 2020 and the increase in 2019 relative to 2018 are notable because they are counter to the trend from 2015 through 2018 of declining median farm household income.
Summary Findings
• Crop cash receipts are forecast at $200.2 billion in 2020, increasing $6.5 billion (3.3%) from 2019 in nominal terms.
• Soybean receipts in 2020 are expected to increase $2.6 billion (7.5%) in nominal terms as higher prices should outweigh the effect of lower quantities relative to 2019.
• Corn receipts are projected to fall by $2.5 billion (5.1%) in 2020 because of lower forecasted prices and quantities.
• Wheat receipts are forecast to fall $0.1 billion (1%) as negative effects from lower quantities should be larger than positive price effects.
• Total animal and animal product cash receipts are expected to fall $9.7 billion (5.5%) to $166.3 billion in 2020 in nominal terms. Broilers and cattle and calves are projected to see the largest declines in cash receipts in dollar terms, but growth in cash receipts is expected for turkeys and chicken eggs.
• Milk receipts are expected to decrease $0.1 billion (0.2%) in 2020 in nominal terms, reflecting a lower price forecast.
• Cash receipts from cattle and calves are expected to fall $4 billion (6%), mainly due to lower price forecasts this year.
• Lower forecast prices are expected to cause a drop of $1.1 billion (5.1%) in hog cash receipts in 2020.
• Direct government farm program payments are forecast to increase 107.1% ($24 billion) from 2019 to 2020.
• Supplemental and ad hoc disaster assistance payments this year are forecast at $32.4 billion, an increase of $31 billion from 2019, mainly from payments from the Coronavirus Food Assistance Programs, CFAP1 and CFAP2, and the Paycheck Protection Program.
• The CFAP1 and CFAP2 provide direct relief to producers whose operations have been directly affected by COVID-19. Payments in calendar year 2020 for these USDA programs are forecast at $24.3 billion, $11 billion for CFAP1 and $13.3 billion for CFAP2.
• The PPP, administered by the Small Business Administration, is designed to help small businesses keep their workers on the payroll during COVID-19. Although administered as a “loan” the loans will be forgiven if the program’s requirements are met. “We treat these loans as a direct payment to farmers and forecast them at $5.9 billion in 2020. This amount may be revised, with any unforgiven amounts ending up as farm debt rather than a direct payment,” Litkowski said.
• Payments in calendar year 2020 under the Agriculture Risk Coverage program are expected to increase $0.4 billion from 2019 levels while Price Loss Coverage payments in 2020 are expected to increase $3.1 billion from 2019 levels.
• Conservation payments from the financial assistance programs of USDA’s Farm Service Agency and Natural Resources Conservation Service are expected to be relatively unchanged at $3.8 billion in 2020.
• Market Facilitation Program payments to aid farmers in response to trade disruptions are expected to decline $10.5 billion from 2019 levels. The 2020 forecast of $3.7 billion reflects payments authorized in 2019 but paid in 2020.
• The Dairy Margin Coverage Program replaced the Dairy Margin Protection Program in the 2018 farm bill and is forecast to make net payments of $0.2 billion to dairy operators in 2020.
• Farm sector production expenses, including expenses associated with operator dwellings, are forecast to decrease by $5.2 billion (1.5%). Forecast at $343.6 billion, 2020 production expenses are 19.9% below the record high of $429 billion in 2014 in inflation-adjusted terms.