‘Trump bump’ in farm income to disappear in 2021
U.S. farm income, buoyed by record-setting farm subsidies this year, will sink in the new year with the disappearance of government payments to buffer the effects of the trade war and the coronavirus pandemic on agriculture, said the FAPRI think tank on Thursday. Farm groups and their allies in Congress are likely to seek billions of dollars in new federal assistance, said analysts.
Market prices for crops and livestock have been in a rut since the collapse of the commodity boom in 2013, with improvement not expected in the near term. Stopgap programs created by the Trump administration have bolstered farm income since 2018 by boosting direct farm payments to double or triple their usual totals. The programs are scheduled to end this year.
“If no new government programs are made available, government payments and net farm income both decline sharply in 2021,” said FAPRI, based at the University of Missouri. It forecast that net farm income, a gauge of profitability, would drop by 17%, to $82.2 billion, next year. Farm subsidies would be just half as large in 2021 as this year. Farm income would not recover to this year’s level until 2024, according to the multiyear FAPRI forecast.
“The projected drop in farm income in 2021 would certainly add to farm financial pressures that already exist,” said FAPRI director Pat Westhoff. “While much remains uncertain, the prospect of lower farm income is likely to draw close attention from policymakers and interest groups.”
FAPRI’s estimate of farm income in 2021 is $10 billion below the inflation-adjusted average income of the past 20 years.
“It’s a big swing,” said one analyst. Farm groups are likely to seek additional support from Congress and the administration if the farm income outlook is grim, he said.
The National Farmers Union believes major change is needed, not the temporary solution of more stopgap payments to farmers, said vice president Mike Stranz. “Lawmakers should look into solutions to the underlying problems that have plagued family farmers for decades: overproduction and corporate consolidation. From our perspective, that would mean comprehensive supply management and strong antitrust enforcement. The combination of those two policies is really the best way to ensure that farmers are independently successful.”
Farm subsidies will set a record this year, whether they total the $32.8 billion estimated by FAPRI or the $37.2 billion forecast by the USDA. The major element in farm subsidies this year is the $16 billion earmarked for farmers and ranchers in the stopgap Coronavirus Food Assistance Program (CFAP). FAPRI believes $11 billion of the CFAP funding will be spent; the USDA assumes all of it will be disbursed.
Agriculture Secretary Sonny Perdue has said he hopes CFAP2, a retooled version of CFAP that covers more commodities and reimburses producers for losses in the spring and summer, will be announced shortly after Labor Day. Perdue has at least $14 billion available for CFAP2.
“No reallocation of residual CFAP funds or spending under a CFAP2 are included in (our) baseline projections, although both are possibilities,” said FAPRI.
Twenty-one senators wrote Perdue on Wednesday to ask him to make all classes of wheat eligible for CFAP and to consider the impact of the pandemic on the 2020 crop. At present, only durum and hard red spring wheat — together accounting for just 30% of U.S. wheat production, said the senators — are part of CFAP.
The huge volume of farm spending in a presidential election year was eyed dubiously by Neil Hamilton, director of the Agricultural Law Center at Drake University. “It’s an amazingly egregious example of vote-buying,” Hamilton told the Financial Times.
The updated farm income baseline by FAPRI is available here.
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