Net Farm Income
Remarkably, despite the roller coaster ride that was 2020 for Nebraska farmers and ranchers, it is estimated net farm income for the state finished the year higher compared to 2019. The latest forecast of 2020 Nebraska net farm income by Dr. Brad Lubben of the UNL Department of Agricultural Economics suggests it will near $6 billion, up from $4.2 billion in 2019. If realized, it would mark the third-highest net farm income on record and the fifth consecutive year of rising farm incomes for the state. Quite a turn-around from prospects last spring. Nebraska Farm Bureau in June estimated crop and livestock receipts could plummet in 2020 by over $2 billion due to the price declines caused by COVID-19.
Two factors contributed to improved net income, higher crop prices and increased government assistance. Corn, soybean, and wheat prices surged in the fall on improved export sales and production hiccups. Nebraska cash prices ended the year 24 percent, 44 percent, and 30 percent higher compared to prices beginning the year for corn, soybeans, and wheat respectively. History suggests roughly 43 percent of the harvested corn crop is marketed in the fall, so most crop producers were able to take some advantage of the higher prices. Cattle producers, though, did not share in the bounty. Cattle prices ended the year lower relative to price levels. The Nebraska weekly weighted average price for 550-600 lbs. steers finished the year down 0.50 percent while the weekly weighted average price for fed steers was off 10 percent.
A substantial increase in government assistance was the other factor contributing to improved income. Nationwide, government payments to agriculture in 2020 were expected to exceed the 2019 amounts by 107 percent. For Nebraska, total government payments are expected to top $2 billion—most of this coming in the form of CFAP payments or other COVID-19 assistance programs. As such, government payments could account for more than 35 percent of net farm income in 2020 (Figure 2). Take away the COVID-19 assistance, and net farm income would have been only marginally higher compared to the prior year.
Figure 1. Nebraska Net Farm Income
Source: USDA, Economic Research Service; 2020 projection by Dr. Brad Lubben, UNL Agricultural Economics Department
Figure 2. Government Payments as a Share of Nebraska Net Farm Income
Source: NEFB calculations based on USDA, Economic Research Service data; 2020 estimates based on income projection by Dr. Brad Lubben, UNL Agricultural Economics Department
Higher statewide net farm income, though, belies a marked and growing spread and variability in profitability among operations. According to data from the Nebraska Farm Business, Inc. (NFBI) for its participating farms, the least profitable operations in 2019 had an average farm income of -$122,000 while the most profitable had an average of $322,000. Of all operations participating, 20 percent of operations had negative income in 2019, and 16 percent had positive income, but it was less than the poverty level for Nebraska. NFBI also reported the income spread between the two groups has widened in recent years. While this data is for 2019, there’s no reason to think the growing income spread improved last year. Tina Barrett, director of NFBI, says the growing income spread is mostly due to cost differences and not major differences in prices received or yields.
