As Trade Aid Winds Downs, Farmers Struggle to Bounce Back

By: - February 5, 2020 12:00 am

Farmer Don Bloss examines a tall sorghum plant in his field in Pawnee City, Nebraska. As the trade war with China winds down, U.S. net cash farm income is expected to decline 9% this year relative to 2019. Nati Harnik/The Associated Press

As a program to compensate farmers for their trade-war-related losses winds down, net cash farm income is expected to decline 9% this year relative to 2019, according to the latest farm income forecast from the U.S. Department of Agriculture. 

The USDA expects net cash farm income, which includes cash receipts from farming and farm-related income minus cash expenses, to be $109.6 billion in 2020, down from $120.4 billion in 2019. Meanwhile, the agency expects total production expenses to increase by $10.4 billion, or 3%. 

The 2020 Farm Sector Income Forecast from the USDA’s Economic Research Service comes the same week the department issued its third and final payment to farmers who have been hurt by the trade dispute. The third tranche brings total tariff payments on 2019 production to $14.5 billion. 

The trade war has eased since President Donald Trump and China signed a “phase one” deal that lessens some tariffs on Chinese goods in exchange for China increasing its purchases of U.S. goods and services. In addition, the U.S.-Mexico-Canada Agreement, or USMCA, which Trump also signed last month, will widen farmer access to Canadian markets.

The USDA forecast also finds that net farm income — a broader measure of profits calculated by subtracting farm expenses from gross farm income — will be up 3.3%, continuing a four-year climb since 2016.

In inflation-adjusted 2020 dollars, net farm income will increase 1.4% from last year but remain well below a peak in 2013. In inflation-adjusted terms, 2020 net farm income would be 30.5% below the $139.1 billion it reached in 2013. 

The divergence between the 2020 forecast of net cash farm income and net farm income “is largely caused by how net sales from inventories are treated,” according to USDA. “Net cash farm income records income in the year the sale occurred, while net farm income counts it in the year the production occurred.”

Trump’s payments to farmers have been credited with shoring up the farm economy, though they have benefited some states more than others. 

Without the MFP payments, “farm-related income from crop and livestock sales in 2019 inflation-adjusted dollars would have been at the second-lowest level in the last decade,” according to the American Farm Bureau Federation. In addition, farm bankruptcies would likely have been worse given record-high farm debt in nominal terms.

Chapter 12 family farm bankruptcies in 2019 increased by nearly 20% from 2018. When compared with figures from over the last decade, the increase trails only 2010, when Chapter 12 bankruptcies rose 33%, according to an analysis by the Farm Bureau.

Georgia had the largest increase in bankruptcy filings — 14 more filings than the previous year, followed by Iowa, Florida and Nebraska, according to the Farm Bureau. 

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April Simpson

April Simpson reports on rural issues at Stateline. Before joining Pew, Simpson was associate editor of Current, where she covered public broadcasting and nonprofit media.