Many farmers will see their incomes rise this year amid the historically massive outpouring of government aid that producers have received as a result of the COVID-19 pandemic, the Agriculture Department reported Wednesday.

USDA economists estimate government farm payments, including the department’s special Coronavirus Food Assistance Program and the Small Business Administration’s Paycheck Protection Program, will total $37.2 billion in 2020, a 65.7% increase over last year and roughly three times what farmers were getting on an annual basis prior to 2018. 

As a result of the federal payments, net cash farm income is forecast to rise by 4.5%, or $4.9 billion, this year to $115.2 billion even though farm cash receipts are expected to be down 3.3% due to slumping markets for livestock, poultry and row crops.

In February, prior to the economic slowdown due to the pandemic, USDA had estimated net cash farm income would drop 9% this year because of an expected decline in federal payments following the “phase one” trade deal with China. 

A broader measure of the farm economy, net farm income, is expected to increase $19 billion, or 22.7%, to $102.7 billion in the latest forecast by USDA’s Economic Research Service. 

Net cash farm income is based on cash receipts from farming, plus government payments and other farm-related income, minus cash expenses. Net farm income also factors in non-cash items such as changes in inventories and depreciation. As a result, net cash farm income is considered the better measure of farmers' cash flow. Net farm income, unlike net cash income, would be higher this year even without the increase in government payments, according to the forecast. 

In February, ERS estimated government payments would fall this year by nearly 37% with the end of the Market Facilitation Program, the assistance provided to farmers in 2018 to 2017 to compensate for the impact of President Donald Trump’s trade war with China. 

The new estimate of government payments this year, $37.2 billion, may be too low. It’s based on an estimate that CFAP payments would total $16 billion, the amount originally budgeted for the program. 

As of this week, the payments have totaled less than $9.5 billion, but Agriculture Secretary Sonny Perdue says the department is preparing to announce a second round of payments, using $14 billion Congress provided through the CARES Act, a coronavirus relief package enacted in March. 

The latest estimate of government aid also includes $5.8 billion in forgivable PPP loans, another program set up under the CARES Act. The loans are essentially grants as long as recipients meet the requirements for expenses. 

ERS economist Carrie Litkowski acknowledged that the final CFAP number could change depending on the final total of the first round and the size of the second round. "We don’t have any insider information" on the rules or cost of the second round, she said. 

Congress is considering authorizing additional funding. A bill that the House passed in May included $33 billion in additional spending for the ag sector, including aid to ethanol producers and payments to livestock and poultry producers for losses not covered by CFAP. A Republican proposal pending in the Senate would authorize $20 billion in additional aid. 

The estimated increase in overall farm earnings masks differences between regions and commodities. 

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Cash receipts for livestock and poultry products are expected to fall 8.1%, or $14.3 billion, this year. Revenue from broilers is expected to be down 23.4% this year, while pork receipts are estimated down 15.9%. Cattle receipts are projected down 7.7%. 

Revenue from crops is estimated to increase 1% to $2 billion but only because higher receipts for fruit and nut crops are expected to offset a decline in revenue for corn, wheat, cotton and soybeans, USDA says. Revenue from cotton, wheat and corn are expected to be down 7.3%, 6.5% and 6.2% respectively.

Total production expenses this year are estimated to be down just over 1%, or $4.6 billion. 

The bottom line for farmers is that crop producers will still see their income increase this year due to CFAP and other government payments, but livestock and poultry producers are expected to have lower net income. 

Net income is expected to increase 24.4% for cotton, 18.4% for specialty crops, 17.3% for soybeans, 15.8% for wheat, and 6.6% for corn.

But income is projected 36% lower for hogs, 20.5% lower for cattle, 10.2% lower for dairy and 9.5% lower for poultry. 

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