USDA, Economic Research Service (ERS) publicly releases forecasts and estimates of financial indicators that provide insights relevant to the financial health of the U.S. agricultural sector. Based on preliminary data and projections, the sector's income is forecast four times over a period spanning from February to the following February. Estimates are released later when more complete data are gathered, for example, from USDA’s Agricultural Resource Management Survey. This report discusses the evolution of the 2020 farm sector income forecasts, illustrating how the Coronavirus (COVID-19) pandemic and related economic uncertainty affected the forecasts. USDA, ERS overestimated 2020 cash receipts and underestimated 2020 production expenses, generally resulting in an overprediction of the 2020 farm sector income relative to official estimates in all four forecasts. The first forecast (released in February 2020) was close to the estimated value because the dollar value of the overprediction of cash receipts nearly offset the underprediction of direct Government payments. In contrast, the last 2020 farm income forecasts (released in February 2021) significantly deviated from the later estimates (released in September 2021), contrary to the historical evidence showing the forecasts converge to the estimates over the forecasting cycle.
Details
Title
COVID-19 Working Paper: The Evolution of U.S. Farm Sector Profitability Forecasts in 2020
Record Identifier
https://ageconsearch.umn.edu/record/340103
Language
English
Total Pages
34
Note
U.S. farm sector NCFI and NFI forecasts for CY 2020 were compared with the first official estimated 2020 values (released in September 2021). Deviations and absolute percent deviations from the official estimates were calculated for each release. The absolute percent deviations were compared with deviations described by USDA, ERS (USDA, ERS, 2023a). Three data sources were used to conduct the analysis. First, all releases containing 2020 forecasts and the first official estimates were obtained from the “All Data” comma-delimited files posted on the USDA, ERS Wealth and Statistics data product website (USDA, ERS, 2023b). Second, for historical comparisons, these data were supplemented with information from the USDA, ERS data file called “Archive of Selected Historical Farm Income and Wealth Statistics Forecast and Estimate Data” (USDA, ERS, 2023c). This archive is available online and contains estimates and forecasts from previous Farm Income and Wealth Statistics data releases beginning with the February 1977 release. However, the archive currently focuses only on cash receipts, NFI, and NCFI. When historical analysis of other NCFI and NFI components was needed, the authors relied on an internal USDA, ERS archive.
Series Statement
Administrative Publication No. 118