By Sean Ellis
Idaho Farm Bureau Federation
POCATELLO – Total net farm income in the United States during 2020 is forecast to increase a whopping 43 percent over 2019. But a huge chunk of that will come in the form of direct government farm payments meant to help producers get through the coronavirus-related shutdowns.
USDA’s December Farm Income Forest, released Dec. 2, estimates net farm income in the U.S. will total $120 billion this year, up $36 billion over 2019. Net farm income is a broad measure of farm profits.
Many people were stunned by the estimated 43 percent increase but agricultural economists say it makes sense when you consider the impact of the farm relief payments USDA provided to producers this year through the ag department’s Coronavirus Food Assistance Program to help offset losses due to the COVID-19 restrictions.
“Government payments were a major source of revenue and income for … farmers and ranchers this past year,” said Doug Robison, Idaho president of Northwest Farm Credit Services.
He said payments from the two rounds of the U.S. Department of Agriculture’s CFAP program provided almost $462 million in financial support to Idaho farmers and ranchers this year.
According to USDA, direct government farm payments are expected to total $47 billion in 2020, an increase of 107 percent over 2019. Almost all of that increase is due to supplemental and ad hoc disaster assistance for COVID-19 relief.
University of Idaho Agricultural Economist Garth Taylor said the increase in net farm income this year is certainly welcome in farm country, especially coming on the heels of several years of depressed commodity prices.
But he also said it’s probably not a slope U.S. agriculture wants to continue to go down because “if you live by the government payment, you can also die by government payment.”
“So much of that (net farm income) total are those government payments,” he said.
Of the $120 billion in net farm income that USDA is forecasting for 2020, 39 percent – $46.5 billion – comes from government payments.
American Farm Bureau Federation Economist John Newton called the 2020 net farm income forecast a “false positive” because cash receipts from crop and livestock sales are actually forecast to decline 1 percent, or $3 billion, to $367 billion this year.
USDA expects total crop receipts to increase $7 billion, or 3 percent, this year, while it expects livestock and animal product receipts to decline by $10 billion, or 6 percent.
Total farm production expenses are expected to decrease by 2 percent, or $5 billion.
But total government payments to producers are expected to reach a record level, far surpassing any previous year. USDA forecasts that will push total net farm income in the U.S. to $120 billion in 2020, which would make this year the second-highest ever for net farm income in the United States.
The record for U.S. net farm income is $124 billion, in 2013.
UI Agricultural Economist Ben Eborn said it appears likely that Idaho will set a record for total net farm income this year. According to USDA, Idaho’s record for total net farm income is $2.66 billion, set last year.
“It looks like our cash receipts will be pretty good, maybe not a record, but government payments are going to push it over the (previous record) for sure,” Eborn said.
The massive increase in government payments will make 2020 a year to remember as far as total net farm income, Taylor said. But even without them, he added, the U.S. agricultural sector would still have a decent year.
Minus government payments, U.S. producers are estimated to bring in a total of $73 billion in net farm income in 2020 from crop and livestock sales, an increase of $12 billion over last year. That would be the highest level since 2014, when U.S. producers brought in $82 billion in net farm income not including government payments.
“Without the government payments, we’re still doing pretty good this year,” Taylor said. “But with those farm payments, we’re close to the record year of 2013.”
USDA normally estimates farm income three times a year and in September the department forecast U.S. net farm income in 2020 would increase by 23 percent.
But the impact of the second round of CFAP payments, which were announced Sept. 17, had not been fully included in that forecast. Now that they are, the agriculture department is forecasting net farm income will soar by 43 percent this year.
Taylor said one of the big takeaways from the USDA income forecast for 2020 is that U.S. agriculture has made a remarkable turnaround from what farmers and ranchers were fearing in April during the height of the COVID-related shutdowns.
When foodservice channels shut down, a huge market for many farm commodities such as milk and potatoes, which are produced in large quantities in Idaho, closed suddenly and farm prices tanked as a result.
But the CFAP payments did what they were intended to do – help farmers survive that bleak period – and farm-gate prices increased during the latter part of 2020.
“We were not looking good in April. We were looking at an absolute disaster,” Taylor said. “The turnaround we’ve seen is nothing short of historic because we were looking at a really bad situation in April.”
The CFAP programs were authorized by Congress well before a late-season rally in many farm commodity prices.
“The government payments were a much-needed source of relief for producers who were impacted by market volatility during the first half of the year, though most ag-related commodity markets experienced some level of improvement after the initial COVID-related sell-off in March and early April,” Robison said.