Farmers are expected to see total income increase overall in 2020, though their accounting spreadsheets might indicate otherwise.
The U.S. Department of Agriculture’s Economic Research Service released its 2020 Farm Income Forecast, which predicts simultaneous increases and declines.
Net farm income is forecast to increase $3.1 billion from 2019 to $96.7 billion in 2020. Net farm income is a broad measure of farm profitability––the return, or profit, to farm operators for their labor, management and capital after all production expenses have been paid.
Net cash income does not include those adjustments and is forecast to decrease by $10.9 billion to $109.6 billion in 2020. This figure includes cash receipts from farming, as well as farm-related income, including government payments—minus cash expenses.
The forecast is a guide mostly observed by government officials, agribusiness operators and lenders, said Tony Banks, senior assistant director of agriculture, development and innovation for Virginia Farm Bureau Federation. The forecast helps to predict market trends affecting programs, sales and lending.
A simultaneous increase and decline of the two measures has happened only twice in the past 20 years. Such a divergence can occur when inventories are adjusted. For example, farmers likely sold products from their 2018 inventories during the short crop year in 2019.
“The forecast is a response to economic situations that were in effect at the time,” explained Banks. “One follows the marketing year, and one follows the calendar year.”
But no matter which farm income forecast is followed, the numbers will change, said Dr. John Newton, American Farm Bureau Federation chief economist. Debt is a factor, and so is international trade.
“Farm income would likely improve if additional sales materialize as a result of improved trade with Canada, Mexico, China and Japan, among others,” he said. “Farm income could face more pressure, however, if those sales do not materialize as expected in the face of increasing crop acreage production.”