Figures updated and released by the U.S. Department of Agriculture’s Economic Research Service show that farm incomes are not only holding steady, but are actually slightly increasing, due to a combination of direct government payments and declining operational costs. Both farm incomes and profits were forecast to rise in 2020, despite declining commodity prices and production.
Livestock producers were hardest hit, and declining revenues for livestock producers dragged down total farm income. The balance sheet for farm assets remained stable overall and was forecast to be almost unchanged from 2019, growing 0.3%. Overall debt, however, was expected to rise by 2.8%, to its highest level since 1981, driven by rising real estate debt.
The latest figures were presented and discussed by Carrie Likowski, a senior farm economist at the U.S. Department of Agriculture’s Economic Research Service who was formerly responsible for farm income figures at the Bureau of Economic Analysis, in a Sept. 2 webinar. The figures cover more than 6 million farmers working two million farms covering more than 900 million acres, and were expressed in year 2000 dollars, unadjusted for inflation.
The figures reflected the severe impacts of the coronavirus’s effects on the supply chain for animals and animal products. The livestock sector’s receipts were expected to decline by 14.3%. Crops were expected to sell lower quantities for higher prices, while the opposite was forecast for livestock. The decline in livestock prices more than compensated for a projected slight increase in crop prices; lower prices for animals and animal products were a drag on total cash receipts for farmers.
Corn cash receipts were forecast to decline due to both lower quantities and lower prices, while soybean cash receipts were forecast to decline as lower quantities offset higher prices.
Net cash farm income for 2020 is forecast at $115.2 billion (up 4.5% relative to 2019 in nominal dollars). Net farm income is forecast at $102.7 billion (up 22.7%). The biggest single factor, said Likowski, is the increase in direct payments to farmers, which are forecast to increase $14.7 billion in 2020 (65.7%). Coronavirus relief payments are the biggest single component of federal payments for 2020, whereas in 2019 the biggest single component were payments under the Market Facilitation Program.
The next biggest factor increasing farm incomes is the decrease in total production expenses, which are forecast to decrease by $4.6 billion (1.3%). The drop followed five years of consistent growth in production expenses. Likowski said it is the biggest single-year drop in production costs since the farm crisis of the 1980s. It was driven largely by a big drop in interest expenses of 27% due to lower interest rates.
Federal commodity insurance is forecast to decrease by $4.5 billion, while cash receipts from commodity sales are expected to decrease by $12.3 billion (3.3%) in 2020.
Farm sector assets and debt are both forecast to increase (by 1.1% and 3.6% respectively), with overall equity rising by 0.7%—again, not inflation-adjusted. Average net cash farm income for farm businesses is forecast to increase 4.8% to $82,600 in 2020. Median total farm household income is forecast to increase 7.9% to $89,647 in 2020.
Cash receipts for fruit and nut crops, on the other hand, were forecast to increase by 17%, due to higher prices. Egg receipts were expected to increase by 12%.
The webinar, titled “Farm Incomes and Financial Forecasts, September 2020 Update” will be available at www.ers.usda.gov/multimedia.
David Murray can be reached at email@example.com.