USDA predicts robust farm income in 2021, aided by market rally
U.S. farm income will be a strong $111.4 billion this year, 20% above the 10-year average, thanks to a recovery in crop and livestock revenue and larger-than-usual federal payments, said the USDA. Higher market prices, particularly for corn, soybeans, cattle, and hogs, and larger production were forecast to boost farm receipts by $20.4 billion from 2020’s level.
USDA spokesman Matt Herrick said the upturn in cash receipts was “owed largely to growing confidence in our economy.” With new outlets, such as the administration’s proposals to mitigate climate change, farmers will not be as reliant on government subsidies or the abrupt ups and downs of the export market, he said.
Although net farm income, a USDA gauge of profitability, would be well above average, it also would be $9.7 billion lower than last year, due to a sharp decrease in federal payments. The government sent a record $46.3 billion in direct payments to producers last year. Payments this year are forecast at $25 billion, double the usual yearly total. The estimate for this year includes $15.6 billion in pandemic relief funds.
“Overall, farm cash receipts are forecast to increase $20.4 billion, 5.5%, to $390.8 billion in 2021,” said the USDA. “When combined, soybean and corn receipts are forecast to increase $16.1 billion, 19%, in 2021.” Corn and soybeans are the two most widely grown crops in the country.
Commodity prices have ascended since last fall as supplies tightened in the face of strong demand. China returned as a steady customer for U.S. farm exports, with purchases forecast at a record $27 billion in the fiscal year ending Sept. 30, compared with $17.1 billion in the previous year.
Along with higher commodity prices, U.S. farmers are expected to plant more land for harvest this year and produce more beef, pork, poultry, eggs, and milk. Larger production will require larger spending on feed, fuel, fertilizer, labor, land rental, and other expenses — up 2.6%, to $322.5 billion, according to USDA estimates. The record is $339 billion in 2014, when the commodity boom collapsed and farm income plummeted.
Farm equity would climb 1.8%, with assets rising more rapidly than debts. One widely used yardstick of financial solvency, the debt-to-asset ratio, would remain stable at 13.9%. The debt-to-asset ratio has climbed slowly since 2012. During the farm recession of the 1980s, the ratio peaked at 22.2%.
“Generally speaking, this is probably the most optimistic February forecast in several years,” said Joe Glauber, former USDA chief economist.
The USDA is scheduled to update its forecast in August and November. Its February estimate is somewhat conditional because it is issued early in the agricultural production cycle. Purdue analysts say the February report tends to “underpredict” the actual income level.
The USDA estimate of farm sector income and finances is available here.