Net Income of Farms is Predicted to Increase for the First Time in Years

Posted by Lillian Frasier on Thursday, February 6th, 2020 at 1:26pm.


The Numbers 

2020 is set to have the highest annual income for farms since 2013 when the market peaked at $139.1 billion. Following that year, the market crashed and this upcoming year is expected to have the first upturn in profit since. This year, it is projected that US farms will bring in a total of $96.7 billion, a 3.3% rise from last year. 

Though this gap between 2013 and now seems large, if this prediction is correct the net income would be $5.1 billion more than the average from 2000 to 2018. Steady growth in the farm industry is a very good thing at this point following 2014’s market decline.

Since Texas provides a massive proportion of United States agriculture, this is great news for Texas landowners who farm or for those who invest in United States farming.



Why Do They Have a Forecast?

This forecast is made yearly by the United States Department of Agriculture and is updated throughout the year. Predictions such as this allow farms to expect certain market conditions throughout the year and plan accordingly. 

This page shows a history of the updates that they have made to the forecast for different reasons. From unexpected disasters such as fires or flooding to changes in markets tied to farming, this page can give you a great idea of what really affects the market.

Updated data is usually released in February, September, and November. As the most recent forecast was released yesterday (February 5), the next release is slated for September 2 of this year.

Usually, this preparation looks like farmers determining the number of seeds they buy as well as and investors limiting or increasing the amount that they put into the market as well as a variety of other responses. Needless to say, this prediction is important for farms across the country. The expectations that it gives producers and consumers alike affect the market massively by determining interest rates of stocks.



Things of Note

It is interesting to note that this rise in forecast prevails despite a drop in government aid from last year. This could be contributed to the rise in aid last year showing a lagging effect in the market.

Another thing that was noteworthy in this market prediction was that net cash income was expected to drop by 9.0% in 2020. In the report, a USDA official was quoted saying, “The divergence between the two measures in the 2020 forecasts is largely caused by how net sales from inventories are treated."

The real estate value of farms and other farm assets are predicted to increase by 1.3% this year as well. This will allow for ranch valuation to perhaps increase throughout the year, which is great news for sellers.



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