2020 Farm Sector Income Forecast, September

The USDA’s Economic Research Service (ERS) indicated on Wednesday that, “Net farm income, a broad measure of profits, is forecast to increase $19 billion (22.7 percent) from 2019 to $102.7 billion in 2020. Net cash farm income is forecast to increase $4.9 billion (4.5 percent) to $115.2 billion.

“In inflation-adjusted 2020 dollars, net farm income is forecast to increase $18.3 billion (21.7 percent) and net cash farm income is forecast to increase $4 billion (3.6 percent).

If realized, both income measures would be above their historical average across 2000-19 when adjusted for inflation.

ERS pointed out that, “Direct government farm payments—which include Federal farm program payments paid directly to farmers and ranchers but exclude USDA loans and insurance indemnity payments made by the Federal Crop Insurance Corporation—are forecast at $37.2 billion, a $14.7 billion increase (65.7 percent). The expected increase is due to supplemental and ad hoc disaster assistance for COVID-19 relief.”

Wednesday’s update stated that, “Overall, supplemental and ad hoc disaster assistance payments in 2020 are forecast at $23.4 billion, an increase of $22 billion from 2019, mainly from payments from the Coronavirus Food Assistance Program (CFAP) and the Paycheck Protection Program (PPP).”

“Market Facilitation Program payments, that aid farmers in response to trade disruptions, are expected to continue in 2020, but decline $10.4 billion from 2019 levels. The 2020 forecast at $3.8 billion reflects payments authorized in 2019 but paid in 2020.”

ERS added that, “Payments in calendar year 2020 under the Agriculture Risk Coverage (ARC) program are expected to decline $0.6 billion from 2019 levels while Price Loss Coverage (PLC) payments in 2020 are expected to increase $2.8 billion from 2019 levels.”

Gregory Meyer and Aime Williams reported on Wednesday at The Financial Times Online that, “Direct federal payments to farmers are forecast to hit $37.2bn in 2020, the US Department of Agriculture said on Wednesday, the bulk of which will come from ad hoc disaster programmes including a scheme to provide relief during the coronavirus pandemic.

‘It looks as if we will have the largest level of government payments in history,’ said Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri.

“In addition to direct payments, the USDA estimated that farmers would receive $5.4bn in insurance payouts from government-backed crop insurance policies, net of premiums,” the FT article said.

With respect to crop receipts, the update stated that, “Soybean receipts in 2020 are expected to decrease $0.2 billion (0.7 percent) in nominal terms, as lower quantities should outweigh the impact of forecast positive prices relative to 2019. Corn receipts are expected to fall by $3.1 billion (6.2 percent) in 2020 relative to 2019. The corn forecast is mostly driven by expected lower prices in 2020, but slightly lower quantities sold are also expected.”

Wednesday’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 forecast to increase in 2019 to $296 from -$1,735 in 2018 and is expected to continue to increase to $934 in 2020.

“Median farm income earned by farm households was negative each year from 1996 to 2018. The increase in median farm income in 2019 and 2020 is largely because of increases in government payments to farm operations.”