Balance sheets for farms may look better at the end of 2020 than they have in years. That’s according to the U.S. Department of Agriculture’s latest forecast.
Some expenses have been lower this year, like diesel to power farm equipment, interest on bank loans and livestock.
“We haven’t had a decline in expenses of this magnitude or duration since the farm crisis of the early 1980s,” says USDA economist Carrie Litowski. But in a presentation about the latest data on farm income, she said income from crop and livestock sales has declined in 2020, even as overall farmers should pull in more money.
“The expected increase in 2020 is largely because of supplemental and ad hoc disaster assistance payments for COVID-19 relief,” Litowski says. Many farmers got checks through the Coronavirus Food Assistance Program and some also borrowed through the Paycheck Protection Program, which will convert loans to grants if certain criteria are met. USDA calculates that as income for now but will make revisions as necessary if some borrowers don’t meet the requirements for the debt to be relieved, Litowski says.
Direct federal payments also include the Market Facilitation Program, which made a final round of payments for trade war relief in 2020, and regular farm bill programs such as Price Loss Coverage and Agricultural Risk Coverage. In total, these government payments will account for 39 percent of farm income this year, which is the most since 2001 when payments made up 41 percent of farm income.
The highest ever amount of farm income from government payments came in 1983 when they accounted for 65 percent of income. Litowski says farmers are in a better position today than during the 1980s farm crisis because land values remain strong and interest rates on debt are low.