Source: POLITICO'S MORNING AGRICULTURE, 2/8/21

The Agriculture Department expects farmers to earn a lot more money from their crops and livestock in 2021 — but not enough to offset higher production costs and a steep dropoff in taxpayer aid, your host reports.

USDA’s forecast for $111.4 billion in net farm income this year would represent a nearly $10 billion decline compared to 2020, when Congress and the Trump administration flooded the farm sector with coronavirus relief payments. The department expects direct agricultural support will fall from a record $46 billion last year to about $25 billion this year.

The good news: Cash receipts are expected to rise by $11.8 billion for crops and $8.6 billion for livestock, as agricultural exports and commodity prices rebound after years of trade headwinds and pandemic-related supply chain disruptions. On the other side of the ledger, farm expenses are expected to increase as producers spend more on fertilizer, feed and labor, USDA said.

A giant caveat: The outlook could change dramatically depending on the trajectory of the pandemic and any additional relief programs. Entirely new sources of farm income are also possible, like a USDA-backed carbon credit market that the Biden administration is thinking about creating through the $30 billion Commodity Credit Corporation.

FWIW: We dug up last year’s February forecast to check the department’s pre-Covid outlook for the farm economy, as a reminder of how much and how quickly things can change. USDA at the time predicted that government farm support would fall by 37 percent in 2020. In the end, direct aid more than doubled last year, bringing farm income to a whopping $120 billion instead of the $96.7 billion that USDA initially projected.