Farm earnings are likely to fall sharply this year despite the $16 billion in COVID-19 assistance payments now being distributed, and farmers’ income is likely to drop again in 2021 without additional government aid, according to a widely followed forecast of the agricultural economy.
Citing the slump in commodity prices and the overall economic slowdown, the University of Missouri’s Food and Agricultural Policy Research Institute estimated Monday that 2020 net cash farm income will drop by 15% to $102.2 billion, down from $120.4 billion in 2019 even after accounting for payments from USDA's Coronavirus Food Assistance Program.
Net cash income is projected down sharply again in 2021 to $95.1 billion.
A broader measure of the farm economy — net farm income — is projected to drop from $93.6 billion in 2019 to $90.6 billion this year and then plunge to $79.4 billion in 2021.
Net cash farm income is based on cash receipts from farming, plus government payments and other farm-related income, minus cash expenses. Net farm income also factors in non-cash items such as changes in inventories and depreciation. As a result, net cash farm income is considered the better measure of farmers' cash flow.
“The outbreak of COVID-19, as well as U.S. government response to the outbreak, continues to impact agricultural markets, disrupting supply chains, shifting consumer demand and expanding government outlays,” the forecast says.
The combination of the $16 billion in CFAP payments and the fall in commodity prices, which will trigger larger payments under farm bill commodity programs, is expected to send government farm subsidies skyrocketing to nearly $33 billion this year, up from $13.7 billion in 2018 and $23.7 billion.
The FAPRI forecast predicts that revenue from crops will drop by about 5% to $186.5 billion and livestock receipts will fall by about 7% to $164.8 billion.
There is little positive news for farmers in the report.
Corn farmers planted an estimated 96 million acres, second only to 2012 in the modern era, which is expected to lead to record production of 15.5 billion bushels and an increase in carryout stocks, pushing the average corn price to $3.06 per bushel, far below the level ($3.70) that triggers payments under the farm bill’s Price Loss Coverage program.
The slump in gasoline and ethanol demand as a result of the stay-at-home orders means the amount of corn used for ethanol will be at its lowest level since the drought of 2012.
The average price for the 2020 soybean crop is expected to slip to $8.21 a bushel, below the PLC reference price of $8.40. Wheat prices, which are expected to average only $4.60 a bushel for the 2019 crop, are expected to increase only slightly to $4.67 for the 2020 crop, still well below the PLC reference price, $5.50 a bushel. No improvement in wheat prices is seen through 2025.
Prices for the 2020 cotton crop are estimated to average 59 cents a pound. (PLC payments are based on the price of seed cotton, which is expected to average 29.4 cents, well below the PLC reference price of 36.7 cents.)
For the livestock sector, per capita consumption of beef, pork and poultry consumption is projected to drop because of higher retail prices as a result of coronavirus-related market disruptions.
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Steer and hog prices are projected down $3 per hundredweight and nearly $5 per hundredweight, respectively, because of packing plant closures and lost sales in the food service sector.
Broiler prices are expected to fall 15% this year because of increased supplies and lower weak demand.
Despite the drop in farm earnings, FAPRI estimates that farmers’ average debt-to-asset ratio will remain flat at 13.5% through 2021. Farm debt is expected to rise about 2% this year, while land values are expected to be up slightly.
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