American farmer's income sharply down this year

Net agricultural income in the United States will fall sharply this year, the United States Department of Agriculture (USDA) expects. The reason? Halving direct government support to farmers. Rising commodity prices may well soften the blow.

According to the USDA, net farm income in the United States will fall by about 8% this year, or a minus of $9,8 billion. This brings income to around $111 billion. Last year, farm income reached its highest level in 9 years (around $121 billion), mainly as a result of government support from the coronavirus. Only in calendar year 2013 was the net farm income even higher, at $124 billion.

The reason for this decrease is a halving of direct government support compared to last year. Of the $46,3 billion in government payments in 2020, the USDA reports that $32,1 billion has been used for "additional and ad-hoc disaster relief." This year, that argument will lapse. Although a sharp decline in agricultural income is expected for this year, the expected income is still 21% higher than the average for the period 2000 to 2019.

Rising commodity prices
Rising commodity prices may well soften the blow, according to several US analysts. For example, a modest increase in raw material prices could already be enough to keep net agricultural incomes close to 2020. With net business income expected to fall by $10 billion, these analysts say it would take 'only' 3% more revenue to maintain net income.

Last year it turned out that the commodities markets can be very volatile, which is why the analysts believe that the above scenario is possible. The weather conditions in particular will play a major role. In addition, global inventories have fallen significantly. Demand from China will also be important. Will the country continue to hoard products, or will demand drop later this year? All in all, it makes it difficult to create expectations and raw material prices can therefore still go in all directions.

Kimberly Baker

Kimberly Bakker is an all-round editor at Boerenbusiness. She also has an eye for the social media channels of Boerenbusiness.

k.baker @boerenbusiness. Nl

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