Farm income to hit 7-year high, thanks to record-setting federal aid
The Trump administration is showering U.S. agriculture with the largest farm supports ever, an estimated $37 billion, chiefly through stopgap programs to mitigate the impact of the pandemic, said the Agriculture Department on Wednesday.
As a result, farm income in 2020 would be the highest in seven years, not counting an additional $14 billion in federal payments on the horizon.
If the USDA estimate proves true, federal payments would equal 36% of net farm income this year, its highest share since 41% in 2001, during another era of stress.
USDA economists said income would soar to $102.7 billion this year, up nearly 23% from 2019. Mammoth federal payments, running two or three times larger than usual, were the primary reason. The estimated $37.2 billion in subsidies would be the largest on record, said a USDA official. Cash receipts from crops and livestock were forecast to dip by 3%, partially offset by a 1% decline in out-of-pocket expenses.
Agriculture Secretary Sonny Perdue said a week ago that he hoped to announce a new version of coronavirus relief “very shortly after Labor Day.” He has at least $14 billion that could be tapped for what he called CFAP2. The original aid program was the Coronavirus Food Assistance Program (CFAP).
“They could exceed, at the end of the day, $37 billion in payments,” said former USDA chief economist Joe Glauber, now at the IFPRI think tank. “One thing we know, they (the income figures) will be revised again.” The USDA is scheduled to update its income forecast on Dec 2 and again in February 2021.
Large adjustments are possible as the year progresses. For example, the initial forecast of $96.7 billion for net farm income this year was made in February, before the coronavirus hit. Some elements remain in doubt. For instance, the USDA estimate of farm subsidies included the $16 billion offered to producers in CFAP in May, but disbursements totaled $9.4 billion at the start of this week. September 11 is the deadline for applications.
If CFAP payments fall short of $16 billion, the estimate of $37.2 billion in subsidies “could cover payments made under a second CFAP program and paid out in calendar year 2020,” said the USDA official. Direct farm program payments include traditional crop subsidies, some land stewardship outlays, dairy supports, and one-time-only initiatives such as trade war payments and coronavirus aid. In pegging federal payments at $37.2 billion this year, the USDA included $5.8 billion from the Paycheck Protection Program.
“I was surprised the 2020 number was as high as it was,” said Pat Westhoff of the FAPRI think tank at the University of Missouri, who projected in June that farm subsidies would set a record this year.
Farm debt would rise at a faster rate than the value of farm assets this year, contributing to a rise in the debt-to-asset ratio, a widely used gauges of financial health. The ratio has been climbing slowly since 2012 and was forecast for 16.2% this year. The ratio is low by historical standards.
Along with its revisions to the 2020 income forecast, the USDA lowered its 2019 income figure to $83.7 billion, a drop of nearly $10 billion due to higher expenses and somewhat lower income from crops, livestock, and federal payments.