Farm income could be $19 billion higher than the 2019 level of $83.7 billion. That is a larger gain than was projected earlier this year, largely due to a nearly $15 billion jump in government payments relative to 2019. That’s according to the U.S. Department of Agriculture (USDA) and its recently released estimate of 2020 U.S. farm income.

What about dairy?

Although the level of U.S. dairy farm income is not provided explicitly in USDA’s numbers, dairy cash receipts are expected to decline by nearly $900 million this year relative to 2019. That is far less than the catastrophic decline of nearly $14 billion that occurred from 2014 to 2015. However, there is a pathway that dairy income could be higher.

In fact, adding the $1.7 billion Coronavirus Food Assistance Program (CFAP) payments made to dairy through August means the dairy industry could end up with total receipts higher in 2020 and in better financial shape than many expected a few months ago. It remains important to note that aggregate U.S. numbers often mask individual effects felt by dairy producers and that the 2020 outlook could still change dramatically depending on new cases of COVID-19 for the remainder of the year.

Even though USDA does not project state-level farm income data, they are reporting the 2019 state-level data for the first time in this release. This state-level data highlights some of the challenges different parts of the country are facing. Even though U.S. dairy cash receipts rose by 14.9% above in 2019 when compared to 2018 levels, some states did not fare as well.

  • Louisiana (-1.6%)
  • Arkansas (-1.8%)
  • Tennessee (-3.2%)
  • South Carolina (-6.8%)
  • Alabama (-8.2%)
  • Delaware (-8.7%)
  • West Virginia (-9.4%)

A generalization would suggest the southeastern states continue to struggle, though there are exceptions as Georgia increased cash receipts by 17.8% in 2019. On the other side, Texas, South Dakota, Idaho, Colorado, Michigan, and Iowa all improved 2019 cash receipts by more than 18% in 2019.

These recent trends in dairy cash receipts are similar to longer term trends. Over the 2011 to 2019 period, only Colorado, South Dakota, and Texas have experienced a greater than 30% increase in dairy cash receipts, while Delaware, New Jersey, South Carolina, Tennessee, Mississippi, Louisiana, West Virginia, Rhode Island, Arkansas, and Alabama all experienced a 30% or greater decline in cash receipts.

It is good to see better news for agriculture given the volatility experienced thus far in 2020. However, agriculture, including dairy, must remain prepared for more financial pressure as the effects of COVID-19 are not over just yet.

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(c) Hoard's Dairyman Intel 2020
September 7, 2020
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