FAPRI Update: U.S. Net Farm Income Projected to Decline

FAPRI indicated that, “Large crops and trade disputes put downward pressure on U.S. farm commodity prices and farm income. Even considering the initial round of market facilitation program (MFP) payments, U.S. net farm income is projected to decline slightly in 2018 and again in 2019.” For background, the baseline update explained that, “The farm income projections incorporate the initial round of MFP payments, announced on August 27, 2018, that provide compensation for losses incurred because of trade disputes. We assume $4.0 billion in MFP payments will be made in calendar year 2018 and another $0.7 billion in 2019. No additional MFP payments are assumed, even though it is possible that a second round will be announced later this year.“Two important caveats: First, these estimates do not reflect any commodity market developments since August 2018, such as changes in the estimated size of the 2018 crop. Second, while MFP payments are included in these farm income estimates, they were not considered in the commodity market projections which were prepared before the payments were announced. In future baseline projections, we will consider possible com- modity supply and price effects of MFP payments.” After analyzing these variables, the FAPRI update noted that, “Net farm income declines by $3 billion in 2018, as the effect of higher production costs more than offsets the increases in cash receipts and payments.”