Highlights from the December 2021 Farm Income Forecast
Suggested citation for linking to this discussion:
U.S. Department of Agriculture, Economic Research Service. Farm Sector Income & Finances: Highlights From the Farm Income Forecast, December 1, 2021.
Farm Sector Profits Forecast to Increase in 2021
Net farm income, a broad measure of profits, is estimated to have increased by $15.7 billion (19.9 percent) in 2020 relative to 2019 and is forecast to increase by another $22.0 billion (23.2 percent) in 2021 relative to 2020. Forecast at $116.8 billion in 2021, net farm income would be at its highest level since 2013 and 24.2 percent above its 2000–20 average of $94.0 billion when prior years are adjusted for inflation. In inflation-adjusted 2021 dollars, net farm income is forecast to increase by $18.4 billion (18.7 percent) in 2021 from the previous year.
Net cash farm income increased by $9.2 billion (8.6 percent) in 2020 relative to 2019 and is forecast to increase by $17.0 billion (14.7 percent) to $133.0 billion in 2021 relative to 2020. When adjusted for inflation, net cash farm income is forecast to increase by $12.6 billion (10.5 percent) from 2020. Net cash farm income in 2021 would be at its highest level since 2014 and 16.9 percent above its 2000–20 average of $113.8 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 from the sale of agricultural commodities are forecast to increase by $64.7 billion (17.8 percent, in nominal terms) from 2020 to $427.3 billion in 2021, driving most of the increase in both net income measures. Total crop receipts are expected to increase by $35.4 billion (17.9 percent) from their 2020 level following higher receipts for corn, soybeans, and wheat. Total animal/animal product receipts are expected to increase by $29.3 billion (17.7 percent) with increases in receipts for broilers, cattle/calves, and hogs.
Lower direct Government payments and higher production expenses in 2021 are expected to partially offset higher cash receipts. Direct Government payments, after increasing by $23.2 billion (103.5 percent) in 2020 relative to 2019, are forecast to fall by $18.5 billion (40.4 percent) from $45.7 billion in 2020 to $27.2 billion in 2021. The decrease is expected because of lower supplemental and ad hoc disaster assistance for COVID-19 relief in 2021 compared with 2020. Meanwhile, total production expenses, including operator dwelling expenses, are forecast to increase by $29.8 billion (8.3 percent) to $387.6 billion (in nominal terms) in 2021. Spending on nearly all categories of expenses is expected to rise.
Average net cash farm income for farm businesses is forecast to increase by $3,000 (3.5 percent) to $89,100 per farm in 2021. However, the regional average net cash farm income outlook is mixed. For farm businesses in the Heartland, Northern Great Plains, Prairie Gateway, Eastern Uplands, and Mississippi Portal average net cash farm income is forecast to increase in 2021, but it is forecast to decline in the Northern Crescent, Southern Seaboard, Basin and Range, and Fruitful Rim. Farm businesses specializing in hogs and corn are expected to see the largest growth in cash farm income in 2021, while those specializing in dairy, cotton, and specialty crops are expected to see 2021 declines.
Farm sector equity is forecast up by $76.0 billion (2.8 percent) to $2.81 trillion (in nominal terms) in 2021. Farm assets are forecast to increase by $88.9 billion (2.8 percent) to $3.26 trillion in 2021, largely reflecting anticipated increases in real estate value. When adjusted for inflation, both equity and total assets are forecast to fall by 1.0 percent. Farm debt is forecast to increase by $12.9 billion (2.9 percent) to $454.1 billion (in nominal terms) but decline 0.8 percent when adjusted for inflation. While real estate debt is forecast to increase in 2021, non-real estate debt is forecast to decline slightly. The farm sector debt-to-asset ratio is forecast to remain relatively steady at 13.91 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 increase by 9.6 percent in 2021 from 2020.
Median Income of Farm Operator Households Estimated to Fall in 2020, Forecast to Be Flat in 2021
Median total farm household income is estimated to decrease to $80,060 in 2020 and then forecast to be relatively flat in 2021 at $82,315. That is a nominal decrease of 3.7 percent (a 4.9-percent decline after inflation) between 2019 and 2020, and a 2.8-percent nominal increase (a 0.9-percent decline after inflation) in 2021.
Farm households typically receive income from both farm and off-farm sources. Median farm income earned by farm households is estimated to decrease in 2020 to -$1,198 from $296 in 2019, and then forecast to decline further to -$1,550 in 2021. The positive median farm income in 2019 was unusual as median farm income earned by farm households was negative each year between 1996 and 2018. Many farm households primarily rely on off-farm income: median off-farm income in 2020 is estimated at $67,873, a decrease of 1.3 percent from 2019. This decline is due to lower earned income—income from wages, salary, and nonfarm businesses—that is not fully offset by higher unearned income—income from interest, investments, pension and retirement accounts, unemployment compensation and other public transfers. In 2021, median off-farm income is forecast to rise by 4.8 percent to $71,123. 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.
See the Farm Household Income and Characteristics data product tables for financial statistics of farm operator households.
- Farm Sector Income and Finances for a discussion of the full farm sector income forecast.
- Farm Household Well-being for a discussion of the farm household income forecast.
- Farm Income and Wealth Statistics for the complete 2021 farm income forecast data and full history of U.S. and State farm sector estimates.
- Charts and Maps About Your State, Charts and Maps of U.S. Farm Sector Balance Sheet Data, and Charts and Maps of U.S. Farm Income Statement Data for farm sector data visualizations.
- Farm Household Income and Characteristics for data related to farm household income and characteristics.
- ARMS Farm Financial and Crop Production Practices data that underpin the farm income forecast and estimates.