Farm Sector Liquidity Forecast to Decline in 2021

Forecasts from USDA’s Economic Research Service (ERS) show farm sector liquidity declining in 2021, following forecasted general improvement in 2020. Liquidity is the ability to convert assets to cash quickly to satisfy short-term obligations when due, without the assets losing material value. It is one tool for measuring the financial performance of the U.S. farm sector over time. USDA uses several different financial metrics to evaluate farm sector liquidity: working capital, the times interest earned ratio, the current ratio, the debt service ratio, and the ratio of working capital to gross revenues

COVID-19 Working Paper: A Timely Tool for Evaluating Financial Conditions in Agriculture: USDA Forecasts of the Value of Production in the Face of COVID-19

The USDA Economic Research Service releases farm income forecasts and updated estimates 3 times per year. Examining trends in the value of production more frequently can provide useful information on some of the impacts of unexpected events on the farm income forecasts

Net Cash Farm Income Trends Over the Past Decade Have Varied By State

U.S. net cash farm income (NCFI) was $106.9 billion in 2018, 12 percent below its 10-year average of$121.0 billion when adjusted for inflation. NCFI is a measure of farm profitability and the ability of farmers to continue production, invest in new machinery, expand their operations, meet their loan obligations, and provide for family living expenses. Strong commodity prices and agricultural exports from 2011 to 2014 resulted in high NCFI during that period. Since then, NCFI income has trended lower. While NCFI in 2018 remains below average, declines from these recent highs have not been experienced uniformly by all States

Net Cash Farm Income Trends Over the Past Decade Have Varied By State

U.S. net cash farm income (NCFI) was $106.9 billion in 2018, 12 percent below its 10-year average of$121.0 billion when adjusted for inflation. NCFI is a measure of farm profitability and the ability of farmers to continue production, invest in new machinery, expand their operations, meet their loan obligations, and provide for family living expenses. Strong commodity prices and agricultural exports from 2011 to 2014 resulted in high NCFI during that period. Since then, NCFI income has trended lower. While NCFI in 2018 remains below average, declines from these recent highs have not been experienced uniformly by all States

COVID-19 Working Paper: The Evolution of U.S. Farm Sector Profitability Forecasts in 2020

USDA, Economic Research Service (ERS) publicly releases forecasts and estimates of financial indicators that provide insights relevant to the financial health of the U.S. agricultural sector. Based on preliminary data and projections, the sector's income is forecast four times over a period spanning from February to the following February. Estimates are released later when more complete data are gathered, for example, from USDA’s Agricultural Resource Management Survey. This report discusses the evolution of the 2020 farm sector income forecasts, illustrating how the Coronavirus (COVID-19) pandemic and related economic uncertainty affected the forecasts. USDA, ERS overestimated 2020 cash receipts and underestimated 2020 production expenses, generally resulting in an overprediction of the 2020 farm sector income relative to official estimates in all four forecasts. The first forecast (released in February 2020) was close to the estimated value because the dollar value of the overprediction of cash receipts nearly offset the underprediction of direct Government payments. In contrast, the last 2020 farm income forecasts (released in February 2021) significantly deviated from the later estimates (released in September 2021), contrary to the historical evidence showing the forecasts converge to the estimates over the forecasting cycle

Current Indicators of Farm Sector Financial Health

Following a steep decline in agricultural commodity prices, the past several years have seen a weaker market for farmland and an uptick in interest rates. At the same time, farm sector income has declined and farm interest expenses have increased. How vulnerable might the farm sector be to a further decline in commodity prices or a rise in interest rates

An Examination of the USDA Net Cash Farm Income Forecast Reliability using a New Archival Farm Income Dataset: A Case Study of the 2020 Forecasts and Estimates

USDA Economic Research Service (ERS) releases short-term forecasts and estimates of farm sector income three times a year, informing the public on the financial health of the U.S. agriculture sector. This paper presents the new data archive of ERS’s farm sector income forecast and estimate releases and analyzes how forecasts and estimates for a calendar year change over time. We also examine the reliability of the net cash farm income (NCFI) forecasts for the calendar year 2020, the first year of the COVID-19 pandemic. We found that the fourth release of the 2020 NCFI forecast, published in February 2021, was less reliable than the initial forecast, published in February 2020, contrary to the historical evidence where the reliability of ERS calendar year forecasts tends to improve with each release