2021 Farm Sector Income Forecast
Net farm income, a broad measure of profits, is forecast to decrease $9.8 billion (8.1 percent) from 2020 to $111.4 billion in 2021. This expected decline follows a forecast increase of $38 billion (45.7 percent) in 2020. After increasing $27.3 billion (25.0 percent) in 2020, net cash farm income is forecast to decrease $7.9 billion (5.8 percent) to $128.3 billion in 2021. In inflation-adjusted 2021 dollars, net farm income is forecast to decrease $12 billion (9.7 percent) and net cash farm income is forecast to decrease $10.4 billion (7.5 percent). If realized, both income measures would remain above their historical average across 2000-19 even after adjusting for inflation.
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 increase $20.4 billion (5.5 percent) to $390.8 billion in 2021 in nominal dollars. Total animal/animal product receipts are expected to increase $8.6 billion (5.2 percent) following increases in receipts for cattle/calves, hogs, and broilers. Total crop receipts are forecast to increase $11.8 billion (5.8 percent) from 2020 levels. When combined, soybean and corn receipts are forecast to increase $16.1 billion (19 percent) in 2021, more than offsetting declines in fruits/nuts, vegetables/melons, and cotton.
- Direct Government farm payments are forecast at $25.3 billion in 2021, a $21 billion (45.3 percent) decrease from 2020. Direct Government farm payments include Federal farm program payments paid directly to farmers and ranchers but exclude U.S. Department of Agriculture (USDA) loans and insurance indemnity payments made by the Federal Crop Insurance Corporation. Most of this decline is because of lower supplemental and ad hoc disaster assistance to farmers and ranchers for the coronavirus (COVID-19) pandemic compared with 2020.
- Total production expenses, including expenses associated with operator dwellings, are forecast to increase $8.6 billion (2.5 percent) in 2021 to $353.7 billion. Expected higher spending in 2021 on feed, fertilizer, and labor is the greatest contribution to this increase.
- Farm sector equity is expected to increase by 1.8 percent to $2.74 trillion in nominal terms, a decline of 0.1 percent after adjusting for inflation. Farm sector assets are forecast to increase 1.8 percent in 2021 to $3.18 trillion following increases in farm real estate. When adjusted for inflation, total assets are nearly unchanged from 2020. Farm sector debt is forecast to rise 2.2 percent to $441.7 billion, with real estate debt forecast to rise 3.1 percent. Debt-to-asset levels for the sector have been trending higher since 2012 and are forecast to rise slightly in 2021 to 13.89 percent. Working capital is forecast to decrease 12 percent in 2021, after a forecast increase of 7.8 percent in 2020.
Growth in Crop Receipts Forecast For 2021
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 in 2021 are expected to increase $9.4 billion (24.3 percent), because of forecasted growth in both prices and quantities sold. Similarly, corn receipts are forecast to increase by $6.7 billion (14 percent) in 2021, caused by higher expected prices and quantities. Lower cotton lint and cottonseed receipts are expected to cause a decrease of $0.3 billion in total cotton receipts (3.9 percent) in 2021. Wheat receipts are forecast to increase $0.2 billion (2.2 percent), as prices and quantities sold are both expected to increase slightly. Receipts for sorghum are forecast to increase $0.2 billion (12.3 percent), also because of projected increases in both prices and quantities sold.
Vegetable and melon cash receipts are expected to fall $1.2 billion (5.7 percent) in 2021, mostly because of lower prices. Cash receipts for fruits and nuts are expected to fall $3.2 billion (9.6 percent) in 2021, as the effects of lower prices should outweigh a positive quantity effect. A decline in sugar beet receipts is also forecast for 2021, totaling $0.3 billion (17 percent).
Animal/Animal Product Receipts Forecast to Increase in 2021
Total animal/animal product cash receipts are expected to increase $8.6 billion (5.2 percent in nominal terms) to $175 billion in 2021. This includes growth in receipts for cattle and calves, broilers, and hogs, while declining cash receipts are expected for milk and chicken eggs.
Milk receipts are expected to decrease $0.8 billion (2 percent) in 2021, reflecting a lower price forecast. Cash receipts from cattle and calves are expected to increase $3.9 billion (6.4 percent), mainly because of higher price forecasts. Similarly, a higher price forecast is the main driver of the forecasted increase of $3.2 billion (15 percent) in hog cash receipts in 2021.
Broiler receipts are expected to increase $2.3 billion (10.6 percent) in 2021, mostly due to higher expectations for prices. Cash receipts for chicken eggs are expected to fall $0.2 billion (2.2 percent) in 2021, as negative price effects should outweigh positive quantity effects. Slightly higher prices and quantities sold should drive receipts for turkeys $0.1 billion (1 percent) higher in 2021.
Increasing Prices and Quantities Sold Drive Growth in Cash Receipts in 2021
To better understand the factors underlying the forecast change in annual receipts from 2020 to 2021, we decompose the change into two separate effects:
- a "price effect" where we project the change in cash receipts associated with holding the quantity sold constant at 2020 levels and allowing prices to change to forecast 2021 levels, and
- a "quantity effect" where prices are held constant from 2020 and quantities change to forecast 2021 levels.
In 2021, increasing prices and quantities are expected to have positive effects on cash receipts. Overall, cash receipts are forecast to increase $20.4 billion in 2021, with an estimated positive price effect of $11.8 billion, and a projected positive quantity effect of $8.1 billion. In addition, an upward shift of $0.6 billion is from forecasts for commodities whose price and quantity effects cannot be separately determined. Price and quantity effects on cash receipts are positive for both crop and livestock commodities, with stronger price effects for livestock commodities, and stronger quantity effects for crops.
Direct Government Farm Payments Forecast to Decrease in 2021
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 farm bill legislation. Government payment amounts do not include Federal Crop Insurance Corporation indemnity payments (listed as a separate component of farm income) or USDA loans (listed as a liability in the farm sector’s balance sheet). After reaching a record high in 2020, direct Government farm program payments are forecast to decrease 45.3 percent ($21 billion) to $25.3 billion in 2021. This overall decrease reflects lower 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 2021 are forecast at $15.6 billion, a decrease of $16.5 billion from 2020, mainly because of lower payments from the Coronavirus Food Assistance Program and the Paycheck Protection Program (PPP).
- 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. The PPP payments are designed to help small businesses keep their workers on the payroll. 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 (assuming all recipients will meet the requirements and therefore have their loan forgiven). The forecast amounts may be revised as more data become available, with any unforgiven amounts ending up as farm debt rather than a direct payment.
- 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. This amount may be revised as more information becomes available.
- Payments in calendar year 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 $0.4 billion from 2020 levels. Under the 2018 Farm Bill, producers were able to change their program election (ARC or PLC) for their farms for crop year 2020 compared with the prior election for the farm under the 2014 Farm Bill, and many participants switched from ARC to PLC. Additionally, 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.
- Conservation payments from the financial assistance programs of USDA's Farm Service Agency and Natural Resources Conservation Service are expected to increase $0.3 billion to $4.2 billion in 2021.
- The Dairy Margin Coverage Program replaced the Dairy Margin Protection Program in the 2018 Farm Bill and is forecast to make net payments of $0.1 billion to dairy operators in 2021.
- Minimal residual payments from the Market Facilitation Program (MFP) are included in our 2021 forecast, but at a much lower level than 2018-20 because no new payments have been programmed by USDA.
See data table on government payments.
Production Expenses Forecast to Increase in 2021
Farm sector production expenses (including expenses associated with operator dwellings) are forecast to increase $8.6 billion (2.5 percent) in nominal terms to $353.7 billion in 2021. If this forecast is realized, production expenses would remain 18.9 percent below the record high of $436.1 billion in 2014 in inflation-adjusted terms.
See data tables on production expenses.
Fuel, Fertilizer, and Feed Among Costs Expected to Rise
- Fuel and oil expenses are projected to increase $0.8 billion (7 percent) to $12.2 billion in nominal dollars.
- Fertilizer-lime-soil conditioner expenses are expected to rise $1.4 billion (6 percent) to $25 billion.
- Overall, cash labor expenses are forecast to go up $1.6 billion (4.6 percent) to $36.9 billion, mostly because of an increase of $1.5 billion (5.3 percent) in hired labor expenses.
- Livestock and poultry expenses are forecast to increase $1 billion (3.6 percent) to $27.7 billion.
- Feed expenses, the largest single expense category, are forecast to rise $1.9 billion (3.2 percent) to $62 billion in 2021.
- Interest expenses are expected to increase $0.4 billion (2.6 percent) 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
- Net rent to landlords (including landlord capital consumption) is expected to fall by $0.8 billion (4.4 percent) in 2021 to $17.4 billion; property taxes and fees are forecast to increase $0.2 billion (1.1 percent) to $15.3 billion.
- Seed expenses are projected to fall $0.4 billion (1.9 percent) to $20.9 billion.