COVID-19 Working Paper: The Evolution of U.S. Farm Sector Profitability Forecasts in 2020

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.