High Farm Income Infiltrating Farmland Values


By Sara Schafer, AgWeb

January 6, 2022


For 2021, USDA expects net farm income to hit $116.8 billion. That’s up $22 billion, or 23%, from 2020. The forecast puts this year’s net farm income level at its highest level since 2013 when net farm income reached a record $143.5 billion.


The 2021 forecast is also 24.2% above its 2000 to 2020 average of $94 billion, when prior years are adjusted for inflation. In inflation-adjusted 2021 dollars, net farm income is forecast to increase by $18.4 billion, 18.7%, in 2021 from the previous year.


“This data confirms the obvious — there is plenty of income and cash in farm country and is being reflected in the record prices being paid for farmland,” says Mike Walsten, contributing editor to LandOwner. 


What does this strength mean looking ahead? USDA notes its solvency ratios are all well in the calm category, Walsten says. The debt-to-asset, debt-to-equity and current ratios are stable in 2021 versus 2020 to rise by 0.02 to 16.16.


However, working capital — the amount of cash and cash-convertible assets minus amounts due to creditors within 12 months — is forecast at $92.8 billion in 2021, a 9.6% increase from 2020.


For decades Walsten has tracked the farm debt-to-income ratio, which is the total debt as forecast by USDA divided by net farm income.


“That ratio is a very comfortable 3.9-to-1,” he says. “We consider a ratio above 5-to-1 as worrisome and a move above 6-to-1 as a major cause of concern. We don’t expect that ratio to surge above 6-to-1 over the next few years.” -Sara Schafer


Net Farm Income Jumps 23% from 2020 ...


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