Farm Income Could See $9.8B Drop
Published: Friday, February 19, 2021
Net farm income, a broad measure of profits, is forecast to decrease $9.8 billion (8.1 percent) to $111.4 billion in 2021. In inflation-adjusted 2021 dollars, net farm income is forecast to decrease $12 billion (9.7 percent) in 2021 after increasing $37.8 billion (44.2 percent) in 2020 to its highest level since 2013. Despite this decline, 2021 net farm income would be 21 percent above its 2000-19 average of $92.1 billion.
After increasing a forecasted $27.3 billion in 2020, net cash farm income is forecast to decrease $7.9 billion (5.8 percent) to $128.3 billion in 2021. Inflation-adjusted net cash farm income is forecast to decrease $10.4 billion (7.5 percent) from 2020 and would be 15.3 percent above its 2000-19 average ($111.3 billion).
Net cash farm income encompasses cash receipts from farming as well as farm-related income, including government payments, minus cash expenses. It does not include noncash items—including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings—reflected in the net farm income measure above.
Cash receipts are forecast to increase in 2021, but lower direct government farm payments are expected to drive most of the decline in both net income measures.
Cash receipts for all commodities are forecast to increase $20.4 billion (5.5 percent) to $390.8 billion (in nominal terms) in 2021.
Total animal/animal product receipts are expected to increase $8.6 billion (5.2 percent) with increases in receipts for cattle/calves, hogs, and broilers.
Total crop receipts are expected to increase $11.8 billion (5.8 percent) from 2020 levels following higher receipts for soybeans and corn.
Direct government farm payments are forecast at $25.3 billion in 2021, a decrease of $21 billion (45.3 percent) in nominal terms. The expected decrease is because of lower supplemental and ad hoc disaster assistance for COVID-19 relief in 2021 relative to 2020.
Also contributing to the 2021 decline in net income are higher production expenses. Total production expenses, including operator dwelling expenses, are forecast to increase $8.6 billion (2.5 percent) to $353.7 billion (in nominal terms) in 2021. Most of this reflects higher spending on feed, fertilizer and labor.
Farm business average net cash farm income is forecast to decrease $6,100 (6.2 percent) to $91,800 per farm in 2021. Farm businesses in all resource regions are forecast to see declines in net cash farm income except the Heartland. When farm businesses are categorized by commodity specialization, most see average net farm income fall in 2021. The exceptions are farms specializing in wheat, corn, soybeans and hogs.
Farm sector equity is forecast up by $47.8 billion (1.8 percent) to $2.74 trillion (in nominal terms) in 2021. Farm assets are forecast to increase by $57.4 billion (1.8 percent) to $3.18 trillion in 2021, reflecting anticipated increases in the value of real estate assets held by the sector.
Farm debt is forecast to increase by $9.6 billion (2.2 percent) to $441.7 billion (in nominal terms), led by an expected 3.1-percent rise in real estate debt. The farm sector debt-to-asset ratio is expected to rise slightly from 13.84 percent in 2020 to 13.89 percent in 2021.
Working capital, which measures the amount of cash available to fund operating expenses after paying off debt due within 12 months, is forecast to decrease 12 percent from 2020. When adjusted for inflation, farm sector equity and assets in 2021 are relatively unchanged from 2020.
Total median farm household income is forecast to increase to $86,086 in 2020 and then remain relatively flat in 2021 at $86,917. That is a nominal increase of 3.6 percent (a 2.5 percent increase after inflation) between 2019 and 2020, and a 1 percent increase (a .9 percent decline after inflation) in 2021. The forecast rise in 2020—continued from 2019—is notable because it counters the trend from 2015 through 2018 of declining median farm household income.
Farm households typically receive income from both farm and off-farm sources. Median farm income earned by farm households is forecast to increase in 2020 to $767 from $296 in 2019, and then decline to $495 in 2021.
The positive median farm income in 2019, and that forecasted for 2020 and 2021, is notable as median farm income earned by farm households was negative each year between 1996 and 2018. The increase in median farm income is partly because of increases in supplemental and ad hoc disaster assistance program payments.
In 2020 and 2021, programs such as the Paycheck Protection Program, the Coronavirus Food Assistance Program, and the latest COVID-19 aid package outlined in the Consolidated Appropriations Act 2021, are forecast to provide financial relief to those affected by the global pandemic.
As in previous years, many farm households rely on off-farm income: the median is forecast to increase in 2020, up 1.5 percent to $69,784, and to continue to rise by 2.3 percent in 2021 to $71,407, making it the highest median off-farm income since 2014. Since farm and off-farm income are not distributed identically for every farm, median total income will generally not equal the sum of median off-farm and median farm income.
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