Net Farm Income Would Have Been at 2009 Levels Without Gov. Payments

Aid for Farmers 062220

Producers who have faced price declines and additional marketing costs due to COVID-19 are continuing to receive financial support through the Coronavirus Food Assistance Program (CFAP).

USDA has provided more than $4 billion worth of aid from CFAP. The Farm Service Agency says as of June 22, CFAP payments have gone out to more than 252,000 producers. The average payment is expected to total $13,000.

Total government payments are at the highest level ever this year, says Pat Westhoff, FAPRI director at the University of Missouri. “It’s indeed a huge portfolio of people’s bottom line,” he adds.

According to FAPRI, without the government payment boost in 2020, net farm income would be at its lowest level since 2009. This year, roughly one-third of net farm income could come in the form of a government payment (although it depends on the farmer and if he/she has multiple sources of income), Westhoff says. Government payments for 2020 include CFAP, “normal” ARC and PLC, the final 2019 MFP, CRP and the dairy program.

“There are some producers where [the CFAP payments] will be enough to make a major difference in their finances,” he says. “For others, the payments may not be as large because of different payment rates for different types of commodities.”

Other economists are seeing financial struggles in the ag sector too. The latest Rural Mainstreet Index, a survey of bank CEOs in rural areas in 10 states, reports three-fourths of participating bankers citing an economic downturn in their areas.

Slightly more than one-third of bankers said the biggest challenge in their area is low commodity prices.

“Only 3% of bankers said their local economy was expanding,” says Creighton University economist Ernie Goss.

The survey was compiled mid-June when payments were starting to arrive.

“I think it’s going to take some time to say we’re behind or past the coronavirus,” says John Newton, American Farm Bureau Federation economist. “We were talking with our poultry growers recently and for those folks, it may be in 2021 before they are back to normal.”

FAPRI research using USDA figures through 2019 and its own projections for 2020 and 2021 shows next year doesn’t look much better since net farm income is projected to be less than 2020.

“Even though crop and livestock receipts are likely to improve in 2021, the dramatic support in trade assistance and coronavirus assistance means it’s going to be a pretty challenging year in 2021,” Newton says.

Westhoff says the information might change as the year progresses.

Courtesy: John Newton, American Farm Bureau Federation, USDA, ERS, FAPRI