Minding Ag's Business

Lower-Income Forecasts Mask the Real Story

Katie Micik Dehlinger
By  Katie Micik Dehlinger , Farm Business Editor
To see the full picture on U.S. farm income forecast, a person needs to look at all the pieces including what is coming from COVID relief packages and how much are farm inputs rising. (DTN illustration by Nick Scalise)

USDA's farm income forecast for 2021 calls for lower net farm incomes, but that hardly tells the story.

An 8% decline in farm incomes seems like bad news. But, at $111.4 billion, the broad measure of profits is 20% higher than the average from 2000 to 2019.

More to the point, a smaller share of revenue is expected to come from the government. Government payments -- largely from ad hoc programs like the Coronavirus Food Assistance Program -- are expected to drop $21 billion. USDA anticipates a nearly identical rise in cash receipts.

"While a producer might admit that a dollar from the government and a dollar from the market spend the same at the store, they tend to feel a little bit different in the wallet," USDA Chief Economist Seth Meyer said during his presentation at the USDA Agricultural Outlook Forum. "We're simply replacing COVID relief dollars with dollars from the marketplace, and our expectation is largely that commodity cash prices and receipts will provide that additional support in 2021."

Higher production expenses -- specifically feed, fertilizer and labor -- are expected to take a chunk out of revenue possibilities. It's hard to see how they wouldn't.

Retail fertilizer prices are surging. As of the first week of April, DAP was up 51%, at $618 per ton, and MAP 61% more expensive than last year, at $699 per ton, according to data collected by DTN. The spike in nitrogen prices is more recent but still stark. Compared to last year, anhydrous prices are 41% higher, averaging $692 per ton, while urea is 32% more expensive, at $504 per ton.

Dry weather in much of the western United States, the resulting poor forage conditions and stronger wheat prices mean cattle producers will need to be creative with their feed rations to make a profit.

With skilled labor in high demand and new coronavirus variants making the H2-A process even more difficult, farmers will need to get creative on their labor needs, too.

Years with solid farm income forecasts still come with challenges, and while forecasts for prices are strong, weather and demand will remain the proverbial wild cards. As planters start rolling, please be safe, and I hope you make the most of what the 2021 crop year has to offer.

Katie Dehlinger can be reached at: katie.dehlinger@dtn.com

Follow her on Twitter @KatieD_DTN


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