Farmers could face a steep drop in earnings next year unless they can make up in the market what they’ve been getting in government payments this year. USDA’s latest forecast has net farm income this year hitting its highest level since 2013, thanks to soaring government payments and a run-up in prices for soybeans and other commodities this fall.
Net farm income is projected at nearly $120 billion this year, with nearly $46.5 billion of that coming from government payments, including coronavirus relief and the Market Facilitation Program. From 2015 through 2017, government payments averaged less than $12 billion a year.
“We would expect 2021 net farm income to be a lot lower than in 2020 if there are no new ad hoc payments and no major changes in commodity markets,” said Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri.
Another top economist, Dan Basse, expects government payments to fall back to $15 billion or $17 billion in 2021, but he’s bullish on commodity prices, especially if China keeps buying aggressively. Basse, president of AgResource Co., says soybean prices could go as high as $14 to $16 a bushel, given the tightening stocks and prospects for crops in South America.
By the way: USDA economist Carrie Litkowski says while the risk of insolvency in the farm sector is rising, it’s still relatively low. The farm debt-to-asset ratio has been increasing since 2013 and is at its highest level since 2002, but it’s still nowhere near the levels observed in the 1980s farm crisis, she said on a webinar.