Without government relief, some analysts are sharply lowering their estimates of net farm income because of the impact of the COVID-19 crisis on agricultural markets, with the livestock sector and corn growers bearing much of the hit.
A forecast released Monday by the Food and Agricultural Policy Research Institute, based at the University of Missouri, estimates net farm income in 2020 at $86 billion, down 11% from the Agriculture Department's estimate of farm earnings for 2019. The new forecast doesn’t account for payments that the Trump administration is preparing to send to farmers.
The Agriculture Department is expected to announce plans for a package of $16 billion in pandemic-related assistance in coming days, and USDA will have an additional $14 billion available starting in July.
USDA estimated net farm income for 2019 at $96.7 billion. FAPRI had previously forecast farm earnings would rise to $106 billion in 2020 because of the benefits of the “phase one” trade agreement with China. But in the new analysis, FAPRI lowered its estimate by $20.1 billion to $86 billion based on the impact of the COVID-19 crisis.
The new forecast doesn’t take into account the possible affects of supply chain disruptions, including the closure of meatpacking plants, that could further reduce prices paid to producers, said FAPRI Director Patrick Westhoff.
The analysis also assumes the United States will have a relatively short, V-shaped recession, followed by a rebound in the latter part of the year, he said. That is “far from being a worst-case scenario,” Westhoff said.
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In the analysis, FAPRI economists lowered their 2020 estimates of livestock prices by 8% to 12% and their forecast for crop prices by 5% to 10%.
FAPRI lowered its estimate for live cattle prices by 11.5%, hog prices by 9.1%, broiler prices by 7.8%, and the all milk price by 8.8%.
The analysis projects that corn prices will average just $3.35 per bushel this year, down from the previous estimate $3.70, because of the slowdown in ethanol production resulted from reduced gasoline consumption.
FAPRI estimates that ethanol usage will be 1.4 billion gallons lower this year than previously forecast, which reduces corn-for-ethanol usage by 500 million bushels.
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