WEST LAFAYETTE, Ind. – 2020 is shaping up to be a better year for farmers than originally projected but the New Year might not be as kind to the profit margins of food producers.

That’s according to agricultural economists at Purdue University, who spoke during a Dec. 11 about the outlook for corn and soybeans.

USDA recently forecast net cash farm income nationwide for 2020 will increase by $134 billion over the previous year. That’s $19 billion higher than USDA’s estimate from the previous month.

Purdue’s Jim Mintert said the magnitude of the increase contained in the latest USDA income projections were a bit surprising. He said the major boost came from close to $47 billion in payments to farmers by the federal government under various programs to cover losses this year. The losses stemmed from factors such as COVID-19.

Mintert said there hasn’t been an exclusive forecast for 2021 but he estimated a drop in net farm income next year from what he anticipated to be a $12 to $15 billion reduction in government assistance. “They are going to be substantially lower than what they were this year,” he said.

Michael Langemeier, also a Purdue agricultural economist, said close to 40 percent of the net farm income this year was from government payments.

He said the amount was “unusually high” but the percentage of farm income from Uncle Sam dating back to 1972 was higher in 1983, 1987, 1999, 2000 and 2001.

The latest USDA forecast of exports for corn increasing 50 percent from the previous year and soybean exports being 30 percent higher from 2019 was unchanged from projections in November.

Mintert said orders from China have accounted for 85 percent of the increase in U.S. exports for corn while the entire increase in U.S. soybean exports was from higher demand by China.

Mintert said he wasn’t sure if China will continue to order as much corn and soybeans from the United States next year since China, historically, has not relied heavily on grain from this country. 

He said it appears China’s high demand right now is fueled by its desire to rebuild its massive pork industry decimated by African swine flu.

Mintert said the number of hogs slaughtered in China plummeted from 700 million in 2018 to 455 million in 2019 and 455 million, so far, this year. USDA is forecasting China to slaughter 50 million more hogs next year.

In comparison, the United States is projected to slaughter a total of 134 million hogs in 2021.

“You think about that in the context of what that means relative to the size of the U.S. industry. That’s a huge increase and really helps explain what’s going on with respect to China’s demand for corn and China’s demand for soybeans,” Mintert said.

He said China is also trying to better commercialize its hog industry by adapting more of a modern approach to production that relies more on “corn and soybeans as the primary feed stuffs.”

The latest USDA forecast also shows ending stocks for corn tightening from 3.3 billion bushels projected in June to 1.7 billion bushels. Ending stocks for soybeans dropped from 600 million bushels projected in August to 175 million bushels.

“Very, very tight supply situation and radically different from what we thought it was going to be back in August and even September,” Mintert said.

USDA also forecast a .40 cent per bushel increase in the average price of corn for the marketing year from $3.60 projected last month. The per bushel price of soybeans is predicted to increase from $10.40 in November to $10.55.

Mintert said ending stocks are comparable to 2013 when corn sold for $4.46 per bushel and soybeans reached $13 a bushel. “It’s been a very volatile year in terms of what’s taken place with respect to both supplies and usage but especially on the supply side,” he said.