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1 1 (February 24, 2021)

handle is hein.crs/govecip0001 and id is 1 raw text is: S ~I f~esearch $ervic*~ February 24, 2021 U.S. Farm Income Outlook: February 2021 Forecast USDA Projects Lower Farm Income in 2021 Two major indicators of U.S. farm well-being are net farm income and net cash income. The U.S. Department of Agriculture (USDA) projects both indicators to be lower (by 8.1% and 5.8%, respectively) in 2021 than in 2020 despite anoutlookfor substantially higher farmprices and earnings fromcommodity sales. Accordingto USDA's Economic Research Service(ERS), two principalreasons for the projected decline in the farm income measures in 2021 are a decline of $21 billion (-45.3%) in government directpayments fromthe record $46.3 billion paid out in 2020 and a projected increase of $8.0 billion (+2.6%) in farm production expenses in 2021. Cash receipts froms ales ofcrops and livestock are forecast to increase by acombined $20.3 billion (+5.5%) in 2021. In inflation-adjusted dollars,both farmincome measures are above their historic long-run averages (Figure 1). In inflation-adjusted dollars, the 2021 net farm income projection of $111.4 billion, if realized, would be the sixth- highestlevel in the past 47 years-that is,since 1974. Figure 1. U.S. Farm Sector Inflation-Adjusted Income Measures, I 940-202 I (forecast) $ Billions, inflation-adjusted 2021 dollars $175 $150 . $125 Net Cash Incom $100 I ................ $50 $25 - 1940 1950 1950 1970 1990 1990 2000 2010 2020 Source: CRS using data from USDA, ERS, 2021 Farm Income Forecast, February 5,2021 . All values are adjusted for inflation using the Bureau of Economic Analysis (BEA) chain-type GDP deflator, where 2021 = 100. Values for 2021 are forecasts. The farm income forecast by ERS on February 5, 2021, is the first of three ERS forecasts for 2021. The secondfarm income forecast is expected on September 2, 2021, and the third is expected in December 2021. For a review of the 2020 U.S. farm income situation, see CRS Report R46676, U.S. Farm Income Outlook: December2020 Forecast. Table I. U.S. Farm Income Measures, 2019 to 2021 (forecast), $ Billions 2020-2021 Item 2019 2020 2021 %Change Cash Income 426.5 450.8 451.0 0.0% + Crops 193.3 203.9 215.7 5.8% + Livestock 176.0 166.5 175.0 5.2% + Govt Outlays 22.4 46.3 25.3 -45.3% + Farm-Relateda 34.7 34.2 34.9 2.2% Cash Expenses 317.5 314.6 322.6 2.6% Net Cash Income 109.0 136.2 128.3 -5.8% Gross Income 431.9 466.3 465.1 -0.3% + Gross Cash 426.5 450.8 451.0 0.0% + Nonmoneya 18.4 19.7 21.2 7.2% + Inventory Adj. -13.0 -4.2 -7.0 66.8% Total Expenses 348.7 345.2 353.7 2.5% Net Farm Income 83.1 121.1 111.4 -8.1% Source: ERS, 2021 FarmIncome Forecast, February5,2021. Notes:2021 isforecast. a. Includes crop insurance indemnities, customwork, machine hire, agritourism, forest product sales, and otherfarm sources. b. Includes home consumption of farm produce and imputed rental value of farm buildings. c. Includes depreciation of capital assets. Net Farm Income Projected Down in 2021 National net farmincome is projected at $111.4 billion in 2021, down $9.7 billion (-8.1%) from 2020 (Table 1). Net farm income represents an accrual of the value of allgoods and services produced on the farmduring the year-similar in concept to gross domestic product. For example, crop production is recorded as net farmincome immediately after harvest, whether sold or stored on farm. It also includes the imputed rental value offarmdwellings ($20.6 billion in 2021) as revenue but subtracts the depreciation on equipment ($28.7 billion in 2021) as an expense-both of these factors are excluded fromnet cash income. National net cash income is projected at $128.3 billion, down $7.9 billion (-5.8%) from 2020 (Table 1). Net cash income uses a cash-flow concept to measure farmwell- being-only cash transactions for the year are included. Thus, net cash income records a crop's value only after it has been sold in the marketplace. Sales of $7 billion from on-farmcrop inventories fromprevious crop harvests in 2021 are a major factor contributing to thehigher net cash income projection relative to net farmincome. Net cash income tends to be more stable than net farmincome because farmers are able to control the flow of farm cash sales and purchases. ttps:/'crs reports.congress~gc

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