The Van Trump Report

Crop Prices are Higher… But Farm Income Could be Lower in 2021

USDA’s latest outlook for the farm economy in 2021 forecasts higher receipts for crops and livestock but an overall decline in income. Much of the income reduction stems from lower supplemental and ad hoc disaster assistance to farmers and ranchers for the coronavirus pandemic compared with 2020. Meanwhile, receipts for actual sales of crops in livestock are seen rising +5.5% to almost +$391 billion. Unfortunately, some of that will be eaten up by a projected increase in farm expenses for everything from labor to fertilizer to feed.

With those projections in mind, USDA projects a nominal increase in median farm household income to $86,917, up from the $86,086 forecast for 2020. USDA says the forecast rise in 2020-a continuation from 2019-is notable because it counters the trend from 2015 through 2018 of declining median farm household income. As in previous years, many farm households rely on off-farm income. The median in 2020 is estimated to have risen +1.5% to $69,784, and expected to continue to rise by +2.3 percent in 2021 to $71,407, making it the highest median off-farm income since 2014. Data files for income statistics can be found HERE . Below are more details about the USDA’s 2021 projections: 

Direct Government Farm Payments to Drop Significantly 

  • Direct farm payments from the government reached a record-high $46.3 billion in 2020. Keep in mind, government payment amounts do not include Federal Crop Insurance Corporation indemnity payments (listed as a separate component of farm income) or USDA loans. Direct payments in 2021 are forecast at $25.3 billion, a drop of more than -45%. Below are the estimated changes for supplemental and ad hoc disaster assistance payments in 2021, forecast at $15.6 billion compared to $16.5 billion in 2020:
  • The Coronavirus Food Assistance Program provides relief to producers whose operations have been directly affected by COVID-19. Payments in calendar year 2021 for these USDA programs are forecast at $2.5 billion, compared with $23.7 billion in 2020.
  • Payments from the Paycheck Protection Program (PPP), administered by the Small Business Administration, are forecast at $2.8 billion in 2021, compared with $5.9 billion in 2020.
  • Additional COVID-19-related aid to farmers in 2021 is expected to come from the Consolidated Appropriations Act, 2021 signed into law in December 2020. The total direct payments to farmers and ranchers under this legislation is forecast at $8 billion in 2021 and are recorded under supplemental and ad hoc disaster assistance.
  • Payments in 2021 under the Agriculture Risk Coverage (ARC) program are expected to decrease -$1.3 billion from 2020 levels while Price Loss Coverage (PLC) payments in 2021 are expected to increase $400 million from 2020 levels. USDA notes that many producers switched from ARC to PLC for crop year 2020. ARC payments are expected to decrease because of higher market prices for and higher yields in 2020 compared to 2019 levels, particularly for corn and soybeans. PLC payments are expected to increase because of lower prices for seed cotton, rice, and barley compared with 2019. If triggered, ARC and PLC payments for crop year 2020 are received in calendar year 2021.

Crop Receipts Up +5% 
Crop cash receipts are forecast at $215.7 billion in 2021, an increase of +$11.8 billion (+5.8 percent) from 2020 in nominal terms. A $16.1 billion increase in corn and soybean receipts alone more than accounts for the overall net increase, while receipts are expected to fall for vegetables and melons, fruits and nuts, and cotton. 

  • Soybean receipts are projected to increase +$9.4 billion to $47.9 billion, or +24.3%, the largest increase forecast for any of the major cash crops. The growth is seen coming from growth in both prices and quantities sold.
  • Corn receipts will also benefit from sales at higher prices and larger quantities, with USDA forecasting a +14% increase to $54.6 billion.
  • Wheat receipts are forecast a slimmer increase of +$200 million, or +2.2% to just over $9 billion.
  • Livestock and Products Receipts Up +5%

Total cash receipts for animals and animal products is expected to increase by +$8.6 billion (+5.2%) to $175 billion, reflecting growth in receipts for cattle and calves, broilers, and hogs, while declining cash receipts are expected for milk and chicken eggs.

  • Sales for Cattle and Calves are forecast to increase +3.9 billion to just shy of $66 million. The +6.4% increase is seen coming mainly from higher price forecasts.
  • Hog cash receipts are projected to increase +15% to $24.2 billion, up from $21 billion in 2020 and similarly driven by higher expected prices.
  • Milk receipts are expected to decrease -$800 millionillion (-2%) in 2021, reflecting a lower price forecast.
  • Broiler receipts are expected to reach $24.3 billion, an increase of +$2.3 billion (+10.6%) mostly due to higher expectations for prices.
  • Slightly higher prices and quantities sold should drive receipts for turkeys +$100 million higher to an estimated $5.2 million.
  • Cash receipts for chicken eggs are expected to fall -$200 million (-2.2%) in 2021, as negative price effects should outweigh positive quantity effects.

Fuel, Fertilizer, and Feed Costs Expected to Rise
Farm sector production expenses (including expenses associated with operator dwellings) are forecast to increase +$8.6 billion (+2.5%) in nominal terms to $353.7 billion in 2021. If this forecast is realized, production expenses would remain -18.9% below the record high of $436.1 billion in 2014 in inflation-adjusted terms.

  • Fuel and oil expenses are projected to increase +$800 million (+7 percent) to $12.2 billion in nominal dollars.
  • Fertilizer-lime-soil conditioner expenses are expected to rise +$1.4 billion (+6%) to $25 billion.
  • Cash labor expenses are forecast to go up +$1.6 billion (+4.6%) to $36.9 billion, mostly because of an increase of +$1.5 billion (+5.3%) in hired labor expenses.
  • Livestock and poultry expenses are forecast to increase +$1 billion (+3.6%) to $27.7 billion.
  • Feed expenses, the largest single expense category, are forecast to rise +$1.9 billion (+3.2%) to $62 billion in 2021.
  • Interest expenses are expected to increase +$0.4 billion (+2.6%) to $15.8 billion.
  • Pesticide expenses are forecast at $15.7 billion, a marginal increase from the 2020 forecast.

Rent and Seed Expenses Expected to Fall
Personally, I’m not so sure about this one. I feel like all around my area, and most of the areas where I am partners, the rents are not getting any cheaper and neither is the cost of seed. I guess the USDA is seeing things at a much larger scale than I am so perhaps some of you are enjoying cheaper rents and cheaper seed. Interesting…

  • Net rent to landlords (including landlord capital consumption) is expected to fall by -$800 million (-4.4 percent) in 2021 to $17.4 billion; property taxes and fees are forecast to increase +$0.2 billion (+1.1%) to $15.3 billion.
  • Seed expenses are projected to fall -$0.4 billion (-1.9 percent) to $20.9 billion.

Interesting State Comparisons… The USDA also has some great graphics they have been putting together.  I had no idea some of these states were ranked so high and had such larger farm income and the number of farms in their state. It’s always interesting to think about our opinions vs. what the actual data shows. You can see the entire list and more data sets HERE

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