Feb 11, 2021
By Scott Gerlt • ASA Economist
USDA’s Economic Research Service (ERS) released its first forecast of the 2021 farm income numbers on February 5. Both net farm income and net cash farm income are expected to fall from 2020 levels but remain above 2016 through 2019 levels. Net cash farm income is a measure of the value of cash transactions such as cash receipts, government payments and purchased inputs. Net farm income includes this plus non-cash measures such as inventory adjustments, depreciation and rental value of farm dwellings. While expected government payments drop by 45% from 2020 to 2021, farm revenues are expected to increase with larger production and higher prices.
The change in cash receipts for 2020 from 2019 varied by commodity. Corn experienced a drop, while soybeans realized an increase. However, both are expected to have much higher receipts in 2021 due to higher prices and increased production. Soybean receipts are forecasted to increase by 24.3% and corn by 14%. Cotton and wheat changes are anticipated to be much smaller.
ERS’s forecasts for direct government payments to producers is expected to drop from a high of $46.2 billion in 2020 to $25.3 billion in 2021. Almost the entirety of the drop is from supplemental and ad hoc assistance including the Coronavirus Assistance Program, the Paycheck Protection Program the Market Facilitation Program.
Almost all categories of farm production expenses are anticipated to increase in 2021. Only seed purchases and net rent to landlords fall. The recent run-up in fertilizer prices is acknowledged in the forecast. Currently, DAP futures in New Orleans are almost double the amount from one year ago. Depending on when fertilizer was booked and the length of the price surge, the increase in fertilizer costs could be much higher.