2020 Farm Sector Income Forecast
Net farm income, a broad measure of profits, is forecast to increase $36.0 billion (43.1 percent) from 2019 to $119.6 billion in 2020. Net cash farm income is forecast to increase $24.7 billion (22.6 percent) to $134.1 billion. In inflation-adjusted 2020 dollars, net farm income is forecast to increase $35.0 billion (41.3 percent) and net cash farm income is forecast to increase $23.4 billion (21.1 percent). If realized, both income measures would be well above their historical average across 2000-19 when adjusted for inflation and at their highest levels since 2013 and 2014, respectively.
Note: In the text below, year-to-year changes in the major aggregate components of farm income are discussed only in nominal dollars unless the direction of the change is reversed when looking at the component in inflation-adjusted dollars.
- Overall, farm cash receipts are forecast to decrease $3.2 billion (0.9 percent) to $366.5 billion in 2020 in nominal dollars. Total animal/animal product receipts are expected to decrease $9.7 billion (5.5 percent) following declines in receipts for broilers, cattle/calves, and hogs. Total crop receipts are forecast to increase $6.5 billion (3.3 percent) from 2019 levels. Receipts are expected to increase for fruits/nuts, soybeans, vegetables/melons, and sugar beets, while those for corn and cotton are expected to decrease.
- Direct Government farm payments, which include Federal farm program payments paid directly to farmers and ranchers but exclude USDA loans and insurance indemnity payments made by the Federal Crop Insurance Corporation, are forecast at $46.5 billion, a $24.0 billion (107.1 percent) increase. The expected increase is largely because of supplemental and ad hoc disaster assistance for the coronavirus (COVID-19) pandemic.
- Total production expenses, including expenses associated with operator dwellings, are forecast to decrease $5.2 billion (1.5 percent) in 2020 to $343.6 billion. Interest expenses are forecast to decrease $5.4 billion (25.9 percent). Spending on livestock/poultry purchases and oils/fuels are also forecast to decline. However, fertilizer expenses are forecast to increase $1.1 billion (5.1 percent) and net rent to landlords to increase $1.3 billion (7.6 percent) in 2020.
- Farm sector equity is expected to increase by 1.1 percent to $2.69 trillion in nominal terms, a decline of 0.1 percent after adjusting for inflation. Farm sector assets are forecast to increase 1.5 percent in 2020 to $3.12 trillion following increases in farm real estate assets as well as investments and other financial assets. Farm sector debt is forecast to rise 4.0 percent to $435.2 billion, with real estate debt forecast to rise 6.1 percent. Debt-to-asset levels for the sector are trending higher since 2012 and are forecast to rise again in 2020 to 13.95 percent. Working capital is forecast to increase 6.0 percent in 2020, after increasing 11.9 percent in 2019.
Crop Receipts Expected To Increase in 2020
Crop cash receipts are forecast at $200.2 billion in 2020, increasing $6.5 billion (3.3 percent) from 2019 in nominal terms. Sectors expected to see growth in cash receipts in 2020 include soybeans, fruits/nuts, and potatoes, while receipts are expected to fall for corn, wheat, and cotton.
Soybean receipts in 2020 are expected to increase $2.6 billion (7.5 percent) in nominal terms, as higher prices should outweigh the effect of lower quantities relative to 2019. Corn receipts are expected to fall by $2.5 billion (5.1 percent) in 2020, because of lower forecasted prices and quantities. Cotton’s decrease ($0.6 billion or 7.8 percent) in 2020 receipts reflects expected decreases in receipts for cotton lint compared to cottonseed, for which receipts should increase slightly. Wheat receipts are forecast to fall $0.1 billion (1.0 percent), as negative effects from lower quantities should be larger than positive price effects. Receipts for sorghum are forecast to increase $0.2 billion (17.8 percent) because of projected increases in both prices and quantities sold.
Vegetable and melon cash receipts are expected to increase $0.7 billion (3.7 percent) in nominal terms in 2020, including a forecasted increase in potato receipts of $0.5 billion (12.3 percent). Cash receipts for fruits and nuts are expected to rise $4.6 billion (16.1 percent) in 2020, driven by higher forecasted prices. In addition, receipts for sugar beets are expected to grow $0.9 billion (74.9 percent).
Animal/Animal Product Receipts Forecast To Decline in 2020
Total animal/animal product cash receipts are expected to fall $9.7 billion (5.5 percent) to $166.3 billion in 2020 in nominal terms. Broilers and cattle and calves are expected to see the largest declines in cash receipts in dollar terms, but growth in cash receipts is expected for turkeys and chicken eggs.
Milk receipts are expected to decrease $0.1 billion (0.2 percent) in 2020 in nominal terms, reflecting a lower price forecast. Cash receipts from cattle and calves are expected to fall $4.0 billion (6.0 percent), mainly due to lower price forecasts in 2020. Similarly, lower forecast prices are expected to cause a drop of $1.1 billion (5.1 percent) in hog cash receipts in 2020.
Broiler receipts are expected to fall $6.7 billion (23.7 percent) in 2020, because of significantly lower expectations for prices. Cash receipts for chicken eggs are expected to grow $1.2 billion (16.1 percent) in 2020, as positive price effects should outweigh negative quantity effects. Higher prices for turkeys should also drive receipts $0.9 billion (20.7 percent) higher despite declining quantities sold.
Falling Prices Drive Drop in Cash Receipts in 2020
To better understand the factors underlying the forecast change in annual receipts from 2019 to 2020, we separate the change into two effects:
- a "price effect" where we project the change in cash receipts associated with holding the quantity sold constant at 2019 levels and allowing prices to change to forecast 2020 levels, and
- a "quantity effect" where prices are held constant from 2019 and quantities change to forecast 2020 levels.
In 2020, declining prices and quantities are both expected to have negative effects on cash receipts. Cash receipts are forecast to decrease $3.2 billion in 2020, with an estimated negative price effect of $2.6 billion, and a projected negative quantity effect of $1.0 billion. In addition, an upward shift of $0.5 billion is from forecasts for commodities whose price and quantity effects cannot be separately determined. However, price and quantity effects are significantly different for crop versus livestock commodities. Animals/animal products are forecast to see negative price effects but positive quantity effects in 2020; conversely, positive price effects and negative quantity effects are forecast for crop cash receipts.
Direct Government Farm Payments Forecast To Increase in 2020
Direct Government farm program payments are made by the Federal Government to farmers and ranchers with no intermediaries. Typically, most direct payments to farmers and ranchers are administered by USDA under the 2018 Farm Bill. Government payment amounts do not include Federal Crop Insurance Corporation insurance indemnity payments (listed as a separate component of farm income) or U.S. Department of Agriculture (USDA) loans (listed as a liability in the farm sector’s balance sheet). Direct Government farm program payments are forecast to increase 107.1 percent ($24 billion) from 2019 to 2020 (see table on government payments). This overall increase reflects higher anticipated payments from supplemental and ad hoc disaster assistance, mainly direct payments for COVID-19 related assistance.
- Supplemental and ad hoc disaster assistance payments in 2020 are forecast at $32.4 billion, an increase of $31.0 billion from 2019, mainly from payments from the Coronavirus Food Assistance Programs (CFAP1 and CFAP2) and the Paycheck Protection Program (PPP).
- The Coronavirus Food Assistance Programs (CFAP1 and CFAP2) provide direct relief to producers whose operations have been directly affected by COVID-19. Payments in calendar year 2020 for these USDA programs are forecast at $24.3 billion ($11 billion for CFAP1 and $13.3 billion for CFAP2).
- Also included under supplemental and ad hoc disaster assistance are payments from the Paycheck Protection Program (PPP), administered by the Small Business Administration. The payments from the PPP are designed to help small businesses keep their workers on the payroll during COVID-19. Although administered as a "loan" the loans will be forgiven if the program's requirements are met. We treat these loans as a direct payment to farmers and forecast them at $5.9 billion in 2020. This amount may be revised, with any unforgiven amounts ending up as farm debt rather than a direct payment.
- Payments in calendar year 2020 under the Agriculture Risk Coverage (ARC) program are expected to increase $0.4 billion from 2019 levels while Price Loss Coverage (PLC) payments in 2020 are expected to increase $3.1 billion from 2019 levels. Under the 2018 Farm Bill, producers were able to change their program election (ARC or PLC) for their farms for crop year 2019 compared with the prior election for the farm under the 2014 Farm Bill. ARC payments increased because 2019 corn and soybean revenues decreased compared with 2018 crop levels. Wheat and seed cotton prices for the 2019 crop are below 2018 crop price levels, significantly increasing the PLC payment rate projections. If triggered, ARC and PLC payments for crop year 2019 are received in calendar year 2020.
- Conservation payments from the financial assistance programs of USDA's Farm Service Agency and Natural Resources Conservation Service are expected to be relatively unchanged at $3.8 billion in 2020.
- Market Facilitation Program payments to aid farmers in response to trade disruptions are expected to decline $10.5 billion from 2019 levels. The 2020 forecast of $3.7 billion reflects payments authorized in 2019 but paid in 2020.
- The Dairy Margin Coverage Program replaced the Dairy Margin Protection Program in the 2018 Farm Bill and is forecast to make net payments of $0.2 billion to dairy operators in 2020.
Production Expenses Forecast To Decrease in 2020
Farm sector production expenses (including expenses associated with operator dwellings) are forecast to decrease by $5.2 billion (1.5 percent). Forecast at $343.6 billion, 2020 production expenses are 19.9 percent below the record high of $429.0 billion in 2014 in inflation-adjusted terms.
See data tables on production expenses.
Expenses Expected to Increase
- Feed expenses, the largest single expense category, are expected to be relatively unchanged from 2019, increasing $0.2 billion (0.4 percent) to $59.7 billion
- Fertilizer-lime-soil conditioner expenses are expected to increase $1.1 billion (5.1 percent) to $23.5 billion.
- Net rent to landlords is expected to increase $1.3 billion (7.6 percent) to $18.1 billion while taxes and fees are forecast to increase $1.0 billion (7.1 percent) to $15.1 billion.
Expenses Expected to Decrease
- Livestock and poultry expenses are forecast to decline $1.9 billion (-6.8 percent) to $27 billion.
- Interest expenses are expected to decline $5.4 billion (-25.9 percent) to 15.3 billion because of historically low interest rates.
- Fuel and oil expenses are forecast to decline $1.9 billion (-14.4 percent) to $11.3 billion following the Department of Energy’s November forecast for lower diesel prices (down $0.53 per gallon) in 2020.