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

Author

Listed:
  • Borisova, Tatiana
  • Litkowski, Carrie
  • Law, Jonathan
  • Mandalay, Okkar

Abstract

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.

Suggested Citation

  • Borisova, Tatiana & Litkowski, Carrie & Law, Jonathan & Mandalay, Okkar, 2023. "COVID-19 Working Paper: The Evolution of U.S. Farm Sector Profitability Forecasts in 2020," Administrative Publications 340103, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersap:340103
    DOI: 10.22004/ag.econ.340103
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    References listed on IDEAS

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    1. Giri, Anil K. & McDonald, Tia & Subedi, Dipak & Whitt, Christine, "undated". "COVID-19 Working Paper: Financial Assistance for Farm Operations and Farm Households in the Face of COVID-19," USDA Miscellaneous 312953, United States Department of Agriculture.
    2. Litkowski, Carrie & Law, Jonathan, "undated". "COVID-19 Working Paper: A Timely Tool for Evaluating Financial Conditions in Agriculture: USDA Forecasts of the Value of Production in the Face of COVID-19," Administrative Publications 309398, United States Department of Agriculture, Economic Research Service.
    3. Ahmad, Wasim & Kutan, Ali M. & Gupta, Smarth, 2021. "Black swan events and COVID-19 outbreak: Sector level evidence from the US, UK, and European stock markets," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 546-557.
    4. Giri, Anil K & McDonald, Tia & Subedi, Dipak & Whitt, Christine, 2021. "COVID-19 Working Paper: Financial Assistance for Farm Operations and Farm Households in the Face of COVID-19," Administrative Publications 327345, United States Department of Agriculture, Economic Research Service.
    5. Diane Charlton & Marcelo Castillo, 2021. "Potential Impacts of a Pandemic on the US Farm Labor Market," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(1), pages 39-57, March.
    6. Olga Isengildina‐Massa & Berna Karali & Todd H. Kuethe & Ani L. Katchova, 2021. "Joint Evaluation of the System of USDA's Farm Income Forecasts," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 1140-1160, September.
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