Farm earnings are broadly expected to ease this year, although USDA's latest farm income forecast projects skyrocketing prices for key commodities will help offset a steep drop in government payments and increases in production costs.
The outlook for individual sectors of the farm economy varies significantly. Steep increases in corn and soybean prices, for example, are raising feed costs for livestock and poultry producers.
But net U.S. farm income, a broad measure of profits, is forecast to fall 8.1%, or $9.8 billion, to $111.4 billion this year. That’s still 21% higher than the average for net farm income over the last 20 years of $92.1 billion, according to USDA's Economic Research Service.
Net cash farm income, which more closely tracks producers’ cash flow, is forecast down 5.8% to $128.3 billion, which is 15.3% above the 20-year average. 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 depreciation and changes in inventory values.
Government payments soared in 2020 to historic levels as Congress and the Trump administration poured coronavirus relief payments and trade assistance into the farm economy. This year, government payments are projected to fall $21 billion to $25.3 billion, a reduction of more than 45%.
The government aid projected for this year includes $8 billion in aid to be distributed from the omnibus bill enacted in December, plus $2.5 billion in additional Coronavirus Food Assistance Program payments and $2.8 billion through the Paycheck Protection Program’s forgivable loans. In 2020, farmers received $23.7 billion in CFAP payments and $5.9 billion through PPP.
Fueled by sharp increases in corn and soybean prices, total cash receipts for all commodities are forecast to increase $20.4 billion, or 5.5% to $390.8 billion this year. Revenue from corn and soybeans is expected to be 19% higher this year at $16.1 billion, while receipts from fruits, vegetables and cotton are expected to be down in 2021.
Those same increases in corn and soybeans will be raising production costs for livestock and poultry producers. Feed costs are forecast to increase $1.9 billion, or 3.2% higher this year, with overall farm production expenses rising 2.5%, or $8.6 billion, to nearly $354 billion. USDA projects significant cost increases for fertilizer (4.6%) and labor (5.3%).
USDA spokesman Matt Herrick said the new farm income forecast as well as export data released Friday detailing the soaring exports to China "reflect a growing need to ramp up our focus on expanding existing markets to create new opportunities for farmers, ranchers and producers at home and abroad.
"New market opportunities will ensure our producers are not so reliant on government support or the whims of a handful of trading partners. Ultimately, the data released today demonstrates growing export strength and a rebound in cash receipts for farmers—two positive stories owed largely to growing confidence in our economy."
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