Farm income cushion for 2021: Higher commodity prices
Crop and livestock prices have rebounded from coronavirus lows last spring and could bolster farm income as massive federal payments recede in 2021, said economists at a farm conference on Monday. Cortney Cowley of the Kansas City Federal Reserve cautioned “the path of this recovery is significantly tied to the path of the pandemic.”
Farm subsidies are running two or three times higher than usual, possibly reaching a record $46 billion this year because of trade-war and coronavirus-relief programs created by the Trump administration. Some $19.9 billion in pandemic aid has been paid to farmers and ranchers since May, according to the USDA.
The FAPRI think tank estimated in September that farm income could fall by 17% in the new year, after the Trump programs end. Farm groups say agriculture should be part of a new coronavirus package, if one can be agreed on during the lame-duck session.
“Economic conditions in agriculture have improved since the beginning of the year, but due in large part to government payments and, more recently, higher commodity prices, which have been a plus,” said Cowley during an online conference sponsored by Ohio State University. “The outlook for the months ahead will depend on the path of agricultural commodity prices and government support.”
Purdue associate professor Todd Kuethe said two interpretations were possible of farm income factors at present; “government payments are going to go away and then the bottom is going to fall out” or “we’re going to get back to these markets, we’re going to get back to that income.” Kuethe, who focused his presentation on farmland values, said “the outlook for farmland is really good…there’s a lot of optimism coming in about incomes in the future.”
This year’s corn and soybean crops will fetch sharply higher season-average prices than were expected in May, according to USDA estimates. Corn is up by 12% and soybeans by 20%. Season-average prices for milk, wheat, cotton, and cattle also are higher. Hog prices are up slightly and broiler chickens are down modestly.
Robust economic growth in 2021 as the United States recovers from the coronavirus shutdown will boost commodity prices almost across the board, said the USDA in its “baseline” projections for 2021 crops. Corn and soybean prices would be the highest in seven years, with soybeans hitting $10 a bushel.
Net farm income is forecast at $102.7 billion this year, the highest since 2013, the final year of the commodity boom. Federal payments are expected to generate nearly 40¢ of each $1 in income.
“That is not a sustainable figure,” said vice president Mike Stranz of the National Farmers Union.