MADISON, WI (SPECTRUM NEWS) — Net Farm Income in 2020 is projected to be up 43% over 2019 according to the American Farm Bureau Federation. According to forecasts, farm income could reach $120 billion in 2020 — the second highest of all time.
However, income from sales of agriculture commodities is down $3 billion, or 1%, from 2019. The sharp rise in net farm income comes from federal agriculture relief programs centered around mitigating impact from coronavirus and trade wars on the food system partnered with scheduled farm relief programs already in place from The Farm Bill.
“An unprecedented level of commodity support has really poured into agriculture this year with the coronavirus, and previously the trade wars,” said Paul Mitchell, agriculture economist with the Renk Agribusiness Institute.
Mitchell said concern over food disruptions drove federal relief programs to act.
“People got very concerned obviously with the food system falling off the rails and people having troubles,” Mitchell said.
Need at food banks has vaulted up during the pandemic, farm to food banks programs aided by federal dollars helped get food to people in need. Those programs helped drive the rising farm income. As did the Coronavirus Food Assistance Programs one and two.
“There's a lot of focus on getting people food,” Mitchell said.
Without the federal payments, farm income was below the 20-year average. Even with them, the pandemic caused a large amount of stress for farmers.
“Well it's really been wild this year with the ups and downs,” said John Haag, a dairy farmer in Dane, Wisconsin. “You go from record high one month, to two months later you're record low, just jumping all over the place.”
Commodity prices have been depressed for the past four to five years. Wisconsin already leads the nation in farm bankruptcies. The state lost 10 percent of its dairy farms in 2019. Haag said more people would have gone out of business if it weren't for the federal relief.
“That's the only thing that kept a lot of farms in business here this year,” Haag said. “If it wouldn't have been for them, for the CFAP payments a lot of people would have gone out of business.”
There were two waves of CFAP payments, totaling about $17.5 billion nation-wide. Wisconsin received about $900 million.
Between CFAP payments, USDA's Farm to Families Food Box programs, trade relief programs and existing farm relief and safety net programs, the federal government spent more than $46 billion subsidizing the U.S. Food supply chain in 2020.
The increase is off-trend for farmers dealing with finance issues from low commodity prices. Mitchell said farmers should use the unexpected influx of cash to position themselves better in the future and taking care of debts and deteriorating equipment and infrastructure.
“This has provided a chance for them to get out there and fix some of these problems and reinvest in things that needed to be reinvested in,” Mitchell said.
Mitchell said farmers should look at high-interest debt sources first. He said the urge is usually to buy equipment to cut down on a profit tax hit, however he said that could cost money in the long run depreciation of machinery value.
“Choose what you're investing in for profit, not just for tax avoidance,” Mitchell said.
Mitchell's suggestions to farmers are also available online.
2021 is uncertain, though Mitchell said early projections show commodity prices holding steady — after a year of ups and downs — and expects adjustments to processing operations to improve overall food stability.
“If everything stays on track we are going to be fine, be back to making money, raising food, growing our food for us,” Mitchell said.
The American Farm Bureau Federation chief economist John Newton wrote that farm income in 2020 is a false positive, and he expects 2021 income to fall back down to where it has been in previous years.
While the future is uncertain, Haag said the present would have been bleak if it weren't for the unprecedented aid of 2020.
“It was a very scary thought to see what was going to happen if we wouldn't have had those CFAP payments,” Haag said. “Not knowing what's going to happen next week or next month and how long you were going to be able to hang on yet.”