by: Chris Zoller, Extension Educator, ANR in Tuscarawas County
The United States Department of Agriculture Economic Research Service (USDA-ERS) on February 5th released their projection for U.S. farm income in 2021. Farm income is projected to fall this year primarily because government payments received by farmers are expected to decline $21.8 billion (46.3%) after increasing $24 billion (104%) in 2020 (see Figure 1).
Figure 1. U.S. Net Farm Income and Net Cash Farm Income, 2000 – 2021 Forecast
Net cash farm income (NCFI) is calculated by subtracting cash expenses from gross income. This figure is expected to grow 23.7% in 2020 but drop $10.4 billion (7.5%) in 2021. Net Farm Income (NFI) is considered a broader measure of profitability that includes changes in inventories, depreciation, and gross imputed rental income. Like NCFI, the U.S. NFI is expected to increase in 2020 and decline 9.7% to $111.4 billion in 2021. If this happens, it will be the first time since 2016 that NFI has fallen. However, NCFI and NFI would remain above their respective averages during the 2000 – 2019 period. A bright spot from the USDA-ERS report is that farm commodity cash receipts are expected to increase 3.6% in 2021.
Based on these projections, budgeting is going to be very important for 2021. Ohio State University Extension has corn, soybean, and wheat budgets available here: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets. I encourage you to use your financials and these budgets as a planning tool. Scheduling an appointment with your lender, accountant, and Extension Educator to discuss options will be time well spent.