U.S. Farm Income Outlook: February 2021 Forecast

U.S. Farm Income Outlook: February 2021 Forecast

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February 24, 2021
U.S. Farm Income Outlook: February 2021 Forecast
USDA Projects Lower Farm Income in 2021
Table 1. U.S. Farm Income Measures, 2019 to
Two major indicators of U.S. farm well-being are net farm
2021(forecast), $ Billions
income and net cash income. The U.S. Department of
2020-2021
Agriculture (USDA) projects both indicators to be lower
Item
2019
2020
2021
(by 8.1% and 5.8%, respectively) in 2021 than in 2020
% Change
despite an outlook for substantially higher farm prices and
Cash Income
426.5
450.8
451.0
0.0%
earnings from commodity sales.
+ Crops
193.3
203.9
215.7
5.8%
According to USDA’s Economic Research Service (ERS),
+ Livestock
176.0
166.5
175.0
5.2%
two principal reasons for the projected decline in the farm
+ Govt Outlays
22.4
46.3
25.3
-45.3%
income measures in 2021 are a decline of $21 billion
+ Farm-Relateda
34.7
34.2
34.9
2.2%
(-45.3%) in government direct payments from the record
Cash Expenses
317.5
314.6
322.6
2.6%
$46.3 billion paid out in 2020 and a projected increase of
$8.0 billion (+2.6%) in farm production expenses in 2021.
Net Cash Income
109.0
136.2
128.3
-5.8%
Cash receipts from sales of crops and livestock are forecast
Gross Income
431.9
466.3
465.1
-0.3%
to increase by a combined $20.3 billion (+5.5%) in 2021.
+ Gross Cash
426.5
450.8
451.0
0.0%
In inflation-adjusted dollars, both farm income measures
+ Nonmoneya
18.4
19.7
21.2
7.2%
are above their historic long-run averages (Figure 1). In
+ Inventory Adj.
-13.0
-4.2
-7.0
66.8%
inflation-adjusted dollars, the 2021 net farm income
Total Expensesc
348.7
345.2
353.7
2.5%
projection of $111.4 billion, if realized, would be the sixth-
highest level in the past 47 years—that is, since 1974.
Net Farm Income
83.1
121.1
111.4
-8.1%
Source: ERS, “2021 Farm Income Forecast,” February 5, 2021.
Figure 1. U.S. Farm Sector Inflation-Adjusted Income
Notes: 2021 is forecast.
Measures, 1940-2021(forecast)
a.
Includes crop insurance indemnities, custom work, machine
hire, agritourism, forest product sales, and other farm sources.
b. Includes home consumption of farm produce and imputed rental
value of farm buildings.
c.
Includes depreciation of capital assets.
Net Farm Income Projected Down in 2021
National net farm income is projected at $111.4 billion in
2021, down $9.7 billion (-8.1%) from 2020 (Table 1). Net
farm income represents an accrual of the value of all goods
and services produced on the farm during the year—similar
in concept to gross domestic product. For example, crop
production is recorded as net farm income immediately
after harvest, whether sold or stored on farm. It also
includes the imputed rental value of farm dwellings ($20.6
billion in 2021) as revenue but subtracts the depreciation on
equipment ($28.7 billion in 2021) as an expense—both of
these factors are excluded from net cash income.

Source: CRS using data from USDA, ERS, “2021 Farm Income
Forecast,” February 5, 2021. Al values are adjusted for inflation using
National net cash income is projected at $128.3 billion,
the Bureau of Economic Analysis (BEA) chain-type GDP deflator,
down $7.9 billion (-5.8%) from 2020 (Table 1). Net cash
where 2021 = 100. Values for 2021 are forecasts.
income uses a cash-flow concept to measure farm well-
being—only cash transactions for the year are included.
The farm income forecast by ERS on February 5, 2021, is
Thus, net cash income records a crop’s value only after it
the first of three ERS forecasts for 2021. The second farm
has been sold in the marketplace. Sales of $7 billion from
income forecast is expected on September 2, 2021, and the
on-farm crop inventories from previous crop harvests in
third is expected in December 2021. For a review of the
2021 are a major factor contributing to the higher net cash
2020 U.S. farm income situation, see CRS Report R46676,
income projection relative to net farm income. Net cash
U.S. Farm Income Outlook: December 2020 Forecast.
income tends to be more stable than net farm income
because farmers are able to control the flow of farm cash
sales and purchases.
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U.S. Farm Income Outlook: February 2021 Forecast
Gross Cash Receipts Down Marginal y
Government Payments Projected Sharply Lower
Total gross cash receipts—which combine sales from crop
Government direct payments to farmers are projected at
and livestock production, other farm-related income, and
$25.3 billion in 2021, a 45% decline from their record level
government direct payments—are projected at $451.0
in 2020 (Figure 3). Typically, most farm program
billion in 2021, down marginally from 2020 (Figure 2).
payments are authorized under farm bill programs.
However, since 2018, USDA has implemented several ad
Figure 2. Farm Gross Cash Receipts by Source,
hoc payment programs in response to the impact on the
1996-2021 (forecast)
U.S. agricultural sector of trade retaliation and the
Coronavirus Disease 2019 (COVID-19) pandemic.
Payments under ad hoc programs are expected to decline
substantially in 2021 as market and trade conditions
improve.
Farm Production Expenses Projected Up 2.6%
Farm sector production expenses are forecast to increase by
$8.6 billion (+2.5%) to $353.7 billion in 2021. The increase
in 2021 production expenses is expected to be spread across
several expense categories, with the largest dollar increases
for feed and labor. Expenses for seeds and net rent are
forecast to decline.
Outlook for Farm Businesses
Average net cash farm income for farm businesses—the
subset of farms that produce the majority of U.S.
agricultural commodities—is forecast to decline by 6.2% in
Source: CRS using data from USDA, ERS, “2021 Farm Income
2021. Farm businesses in all regions, except the Heartland,
Forecast,” February 5, 2021. Al values are adjusted for inflation with
are expected to see declines in average net cash farm
the BEA chained GDP deflator, where 2021 = 100. Values for 2021
income in 2021 (Figure 4).
are forecasts.
Note: Other farm income includes custom farm work, machine hire,
Figure 4. Farm Business Average Net Cash Farm
agritourism, forest product sales, crop insurance indemnities, and
Income by Resource Region, 2020 vs. 2021
cooperative patronage dividends.
Higher prices for crops and livestock products are expected
to raise cash receipts from farm production to $390.7 billion
in 2021, up 5.5% from 2020 and the highest since 2015 in
inflation-adjusted dollars. Together, crop and livestock
receipts are projected to account for a combined 87% of
farm revenue while other farm-related income (8%) and
government direct payments (6%) make up the balance.
Figure 3. U.S. Government Farm Support, 1996-2021
(forecast)

Source: USDA, ERS, “2021 Farm Income Forecast,” February 5,
2021.
Issues for Congress
As the 117th Congress considers spending measures, such as
through reconcilation, the health of the U.S. farm economy
may be a part of the debate. In particular, Congress may
consider the increased role in recent years of large
government payments in supporting farm income. Is such
intervention sustainable? In addition, is it neutral to the
farm decisionmaking process or does it confer any regional
or commodity-specific advantages that might conflict with
market forces?
Source: CRS using data from USDA, ERS, “2021 Farm Income
Forecast,” February 5, 2021. Al values adjusted for inflation with the
Randy Schnepf, Specialist in Agricultural Policy
BEA chained GDP deflator, where 2021 = 100.
Stephanie Rosch, Analyst in Agriculture Policy
Note: For details on the program categories, see CRS Report
R46676, U.S. Farm Income Outlook: December 2020 Forecast.
IF11770
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U.S. Farm Income Outlook: February 2021 Forecast

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