In an update from the Federal Reserve Bank of Kansas City earlier this month (“Financing of Ag Production Loans Eases Further”), Nathan Kauffman and Ty Kreitman stated that, "Farm debt at commercial banks continued to ease in the second quarter."
The USDA’s Economic Research Service (ERS) indicated on Thursday that, “Net farm income, a broad measure of profits, is forecast to increase by $18.5 billion (19.5 percent) from 2020 to $113.0 billion in 2021.
“This expected increase follows a forecast increase of $15.5 billion (19.6 percent) in 2020. After increasing by $4.0 billion (3.7 percent) in 2020, net cash farm income is forecast to increase by $23.8 billion (21.5 percent) to $134.7 billion in 2021. In inflation-adjusted 2021 dollars, net farm income is forecast to increase by $15.0 billion (15.3 percent); net cash farm income is forecast to increase by $19.8 billion (17.2 percent).
If realized, net farm income in 2021 would be at its highest level since 2013; net cash farm income would be at its highest level since 2014.
ERS pointed out that, “After reaching a record high of $45.7 billion in 2020, direct Government farm program payments are forecast to decrease by 38.6 percent ($17.7 billion) to $28 billion in 2021. This overall decrease reflects lower anticipated payments from supplemental and ad hoc disaster assistance, mainly direct payments from COVID-19-related assistance programs.
Thursday’s update stated that, “Supplemental and ad hoc disaster assistance payments in 2021 are forecast at $21 billion, a decrease of $10.6 billion from 2020, primarily because of lower total payments for COVID-19-related aid.
“USDA Pandemic Assistance for Producers including the previous Coronavirus Food Assistance Program (CFAP) provides relief to producers whose operations are directly affected by COVID-19. Payments in calendar year 2021 from these USDA programs are forecast at $9.3 billion. In 2020, producers received $23.5 billion in CFAP payments.
“Payments from the Paycheck Protection Program (PPP), administered by the Small Business Administration, are forecast at $8.7 billion for 2021, compared with $6.0 billion in 2020.”
ERS added that, “Farm bill commodity payments in calendar year 2021 under the Agriculture Risk Coverage (ARC) program are expected to be $6.7 million, a decrease of $1.3 billion from 2020 levels. Price Loss Coverage (PLC) payments in 2021 are expected be $2.2 billion, a decrease of $2.7 billion from 2020 levels.”
“Minimal residual payments of $42.1 million from the Market Facilitation Program (MFP) are included in our 2021 forecast. The payments are at much lower levels than 2018–20 because no new payments have been programmed by USDA.”
With respect to crop receipts, the update stated that, “Corn receipts are forecast to increase by $20.1 billion (43.0 percent) in 2021 because of higher expected prices and quantities. Similarly, soybean receipts in 2021 are expected to increase by $16.3 billion (44.4 percent) because of forecasted growth in both prices and quantities sold.”
Thursday’s update also provided a perspective on farm household income, and stated that, “Farm households typically receive income from both farm and off-farm sources. Median farm income earned by farm households is estimated to decrease in 2020 to -$1,248 from $296 in 2019, and then forecast to decline further to -$1,387 in 2021.”
“Many farm households rely on off-farm income: median off-farm income in 2020 is estimated at $66,779, a decrease of 2.9 percent…[and]…in 2021, median off-farm income is forecast to rise by 2.5 percent to $68,461.”