Highest farm income in eight years, but one-third comes from government

Higher prices for corn, soybeans, hogs, cattle, and broiler chickens — top U.S. ag products — will boost net farm income to $113 billion this year, the highest since 2013, estimated the Agriculture Department on Thursday. Income would be 26% higher than the 10-year average, reflecting the economy-wide recovery from the pandemic.

Government aid would equal one-third of net farm income, down from last year but still larger than average. Last year, direct federal payments and crop insurance indemnities accounted for more than half of farm income, a broad measure of profits. Farm subsidy and land stewardship programs usually run at $10 billion to $15 billion annually. Coronavirus aid programs pushed farm supports to record highs last year.

Thanks to surging commodity prices, farmers will pocket an additional $64.3 billion in crop and livestock receipts, an 18% increase from 2020, said USDA economists. Corn and soybeans would generate $36 billion of the increase. Receipts from hogs would climb by $9.4 billion, cattle by $8.3 billion, and broilers by $7.3 billion. In percentage terms, corn, soybeans, hogs, cattle, and broilers will all see double-digit increases in receipts.

Farmers are benefiting from a rally in commodity prices that began late last summer with the return of China as a leading customer for U.S. farm exports, which are now setting records. Damage to export elevators near New Orleans is posing an unanticipated threat to overseas sales, and grain companies are looking to shift shipments from New Orleans, the premier port for ag exports, to ports in the Pacific Northwest.

The surge in crop and livestock receipts was accompanied by a rapid rise in production expenses, up by $26.1 billion, or 7%, this year on top of the 2.5% increase of 2020, said the Economic Research Service. If realized, expenses would be the highest since 2014. Pesticides would be the only major category of expenses to decline this year. Outlays on livestock feed, the largest expense category, were forecast to climb by 11% this year because of higher grain and hay prices.

Farm debt was down slightly at the same time that the value of land, buildings, equipment, livestock, and other assets was up. The result was an $80 billion, or 3%, increase in farm equity, meaning a stronger financial footing for the sector.

The debt-to-asset ratio, a widely watched gauge of farm-sector financial health, will fall for the first time since 2012, said the USDA, to 13.4%. Last year it was 14%.

The USDA also revised its estimate of 2020 farm income to $94.6 billion, down from its February estimate of $121.1 billion but still a 20% jump from 2019’s total of $79.1 billion. Direct government payments of a record $45.7 billion were the major contributor to higher income in 2020.

“Very large revisions to 2020 figures” said Pat Westhoff, director of the FAPRI think tank, “primarily due to lower crop receipts and higher production expenses.” The USDA lowered its estimate of crop receipts by nearly $12 billion and said expenses were more than $12 billion higher.

FAPRI was expected to update its forecasts of this year’s U.S. crop production, usage, and prices in coming days.

The next USDA estimate of farm income is scheduled for Dec. 1.