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published: February 19th 2021
source: USDA

Farm sector profits forecast to decrease in 2021

Net farm income, a broad measure of profits, is forecast to decrease $9.8 billion (8.1 percent) to $111.4 billion in 2021 (based on the February 2021 report). In inflation-adjusted 2021 dollars, net farm income is forecast to decrease $12 billion 9.7 percent) in 2021 after increasing $37.8 billion (44.2 percent) in 2020 to its highest level since 2013. Despite this decline, 2021 net farm income would be 21 percent above its 2000-19 average of $92.1 billion.
    After increasing a forecasted $27.3 billion in 2020, net cash farm income is forecast to decrease $7.9 billion (5.8 percent) to $128.3 billion in 2021. Inflation-adjusted net cash farm income is forecast to decrease $10.4 billion (7.5 percent) from 2020 and would be 15.3 percent above its 2000-19 average ($111.3 billion). Net cash farm income encompasses cash receipts from farming as well as farm-related income, including govern-ment payments, minus cash expenses. It does not include noncash items—including changes in inventories, economic depreciation, and gross imputed rental income of operator dwellings—re-flected in the net farm income measure above.
    Cash receipts are forecast to increase in 2021, but lower direct government farm payments are expected to drive most of the decline in both net income measures. Cash receipts for all commodities are forecast to increase $20.4 billion (5.5 percent) to $390.8 billion (in nominal terms) in 2021. Total animal/animal product receipts are expected to increase $8.6 billion (5.2 percent) with increases in receipts for cattle/calves, hogs, and broilers. Total crop receipts are expected to increase $11.8 billion (5.8 percent) from 2020 levels following higher receipts for soybeans and corn. Direct Government farm payments are forecast at $25.3 billion in 2021, a decrease of $21 billion (45.3 percent) in nominal terms. The ex-pected decrease is because of lower supplemental and ad hoc disaster assistance for COVID-19 relief in 2021 relative to 2020.
    Also contributing to the 2021 decline in net income are higher production expenses. Total production expenses, including operator dwelling expenses, are forecast to increase $8.6 billion (2.5 percent) to $353.7 billion (in nominal terms) in 2021. Most of this reflects higher spending on feed, fertilizer, and labor.
    Farm business average net cash farm income is forecast to decrease $6,100 (6.2 percent) to $91,800 per farm in 2021. Farm businesses in all resource regions are forecast to see declines in net cash farm income except the Heart-land. When farm businesses are categorized by commodity specialization, most see average net farm income fall in 2021. The exceptions are farms specializing in wheat, corn, soybeans, and hogs.
    Farm sector equity is forecast up by $47.8 billion (1.8 percent) to $2.74 trillion (in nominal terms) in 2021. Farm assets are forecast to increase by $57.4 billion (1.8 percent) to $3.18 trillion in 2021, reflecting anticipated increases in the value of real estate assets held by the sector. Farm debt is forecast to increase by $9.6 billion (2.2 percent) to $441.7 billion (in nominal terms), led by an expected 3.1-percent rise in real estate debt. The farm sector debt-to-asset ratio is expected to rise slightly from 13.84 percent in 2020 to 13.89 percent in 2021. Working capital, which measures the amount of cash available to fund operating expenses after paying off debt due within 12 months, is forecast to decrease 12 percent from 2020. When adjusted for inflation, farm sector equity and assets in 2021 are relatively unchanged from 2020.
    Get the 2021 forecast for farm sector income  at https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/ farm-sector-income-forecast/or see all data tables on farm income indicators at https://www.ers.usda. gov/data-products/farm-income-and-wealth-statistics/data-files-us-and-state-level-farm-income-and-wealth-statistics/
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