USDA’s Economic Research Service (ERS) is forecasting 2020 net farm income to rise by $19 billion from 2019. Net farm cash income is projected to rise by $4.9 billion. If these projections are accurate, this would put both measures above their 2000-2019 averages by small amounts.
So, if cash receipts are declining where did the higher incomes come from? Farm Program and ad hoc payments to farmers will rise from 2019 by near 100%. The red section of the chart below became the largest portion of farm program payments in 2020 which includes Payments from the Corona Food Assistance Program and the Paycheck Protection Program.
Another part of net income is expense. ERS projects the change of expenses by category. The categories projected to increase account for 69% of farm and ranch expenses while 31% of farm and ranch expenses are projected to decline. The net result is that 2020 farm and ranch expenses are projected to decline by 1.3% or $4.6 billion.
USDA ERS – Farm Sector Income Forecast. (n.d.). Retrieved September 3, 2020, from https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-sector-income-forecast/
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What is DMC?
- DMC stands for Dairy Margin Coverage. DMC evolved from previous dairy income support programs. DMC is a direct descendant of MPP-Dairy. Over its evolution, dairy policy has moved from certainty, set minimum price, to income risk that is insured by DMC.
Is DMC permanent?
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In August this year the USDA unveiled the Dairy Revenue Protection (Dairy-RP) program in conjunction with the Risk Management Agency. This program is designed to insure against unexpected declines milk sales on a quarterly basis at a guaranteed coverage level. The revenue will be based upon futures prices for milk and dairy commodities with the coverage level elected by the producer.
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Periodically I revise the livestock costs section of my Iowa-Nebraska dairy budgets. To do this I use the University of MN FinBin farm financial database. The costs revised are drawn from the 200-500 cow benchmark data published by the U of MN Center for Farm Financial Management. The last time these costs were revised was May 2015. Livestock costs rose $2.465 per cwt. compared to 3 years ago. Due to this revision, comparison to previous month’s dairy budgets is more difficult. The intent of the budget is to indicate whether net returns to dairy farms is increasing or decreasing month to month.
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The February 2018 Iowa-Nebraska dairy budget turned very negative for February. I was unable to complete a January budget. The 20,000 pound freestall budget shows a loss of $1.91 per cwt economic return while the 24,000 pound budget was negative by $0.22 per cwt.
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The December 2017 dairy budget utilizes the Central Federal Milk Market Oder minimum prices as published on their website. This occurs about the 10th of every month. I also use various monthly USDA price reports to obtain feed prices, cull cow prices and to calculate corn silage value. Revisions to feed and fixed costs will occur for the January budget. Thus comparison from December 17 to January 18 will not be possible.
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The 20,000 pound dairy budget break even declined slightly for October, $0.0454 per cwt. The return to management improved slightly by $0.1012 per cwt even though the PPD dropped by $0.69 per cwt.
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There was very little change in the budgeted breakeven price for Sept 2017 compared to August. All of the following comparisons will be utilizing the 20,000 pound freestall budget. Total income declined by $0.104 per hundredweight but feed cost declined too, 8.55 cents per hundredweight. Total variable costs were down at 8.7 cents per hundredweight. Return to management declined by 1 cent per hundredweight to $1.81.
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June produced some change in both the income and expense side of the Nebraska and Iowa dairy budgets. Dairy income rose by 69.77 cents/cwt. due to a rise in both butterfat and protein price, which offset a drop in butterfat and protein content. PPD also increased by 13 cents per cwt. But the income rise also saw a rise in feed costs, up by $1.10565 per cwt. All feed costs rose except cottonseed which were flat. All of this net a decline in returns to management of $0.39 per cwt. Returns to management remained positive at $0.48 per cwt.
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Attached is the April 2017 milk production budgets for Iowa and Nebraska. The budgets deteriorated compared to March.
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