Government payments keep net farm income afloat
WASHINGTON — Despite a catastrophic, worldwide pandemic, 2020 is projected to be a banner year for some — mostly large — U.S. farmers, thanks to Uncle Sam.
U.S. net farm income will rise to $120 billion, up more than 40 percent from last year, according to a USDA forecast released last week. Direct government payments, at $24 billion, make up most of the increase.
“That would put it at its highest level since 2014,” Carrie Litkowski, senior economist at the USDA’s Economic Research Service, said of the income boost on Dec. 2.
Large commercial farms, however, are swallowing most of that windfall. Commercial farms, which are about 8 percent of all farms, will see a 30-percent rise in median total farm income this year. Intermediate farms, which make up more than a third of the industry, will see a 5-percent increase, and residential farms, which are more than half of the industry, will see no rise at all.
The USDA defines residential farms as those with less than $350,000 in gross cash farm income and where the principal operator is either retired or has a primary occupation other than farming. Intermediate farms are those with less than $350,000 in gross cash income where the principal’s primary occupation is farming. Commercial farms are those with more than $350,000 in gross cash farm income, including non-family farms.
Overall, median farm household income is forecast to rise nearly 5 percent to about $87,000, most of which is off-farm income.
Farm income was also helped this year by a $16 billion increase in crop value and a $5 billion reduction in production expenses, part of a six-year decline in expenses not seen since the 1980s.
Despite the payouts, not all farm sectors are faring as well. Total cash receipts in the livestock industry are projected to fall nearly $10 billion, while crop cash receipts are expected to rise by nearly $7 billion.
Cash receipts in the broiler industry declined by nearly a quarter to $22 billion due to lower prices, making it, by far, the hardest-hit of the animal-product sectors. The cow/calf sector suffered a 6-percent decline to $62 billion. The dairy sector was essentially unchanged, and the egg sector increased 16 percent to $9 billion.
National crop cash receipts were buttressed by a more than a 16-percent increase in the fruits and nuts sector to $33 billion. Soybeans also rose 8 percent to $37 billion.
The overall agricultural industry is in a relatively stable place, Litkowski said. Although farm debt is at its highest level since 1981, the vast majority of the industry’s $3.1 trillion in assets — about $2.7 trillion — is equity. The rest is debt.
The industry’s debt service ratio, which tracks the share of production used for debt payments, continues to fall from a 2018 high. Although its yearly bankruptcy rate — currently at three per 10,000 farms — has been steadily rising since 2014.
“The likelihood of default across the sector remains low,” Litkowski said. “Looking historically, the balance sheet remains strong, or at least stable.”
The USDA’s next farm income and financial forecast will be released on Feb. 5, during which the department will release its first forecast for 2021.
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