Background Childhood Trauma Trauma or adverse childhood experiences may include physical and sexual abuse, neglect, bullying, community-based violence, extreme poverty, the loss of a parent or primary caretaker, or natural disasters, among other things. These experiences may overwhelm a child’s natural ability to cope and can cause stress reactions in children, including feelings of intense fear, terror, and helplessness. When children are exposed to chronic stressful events, their neurodevelopment can be disrupted. As a result, a child’s cognitive functioning or ability to cope with negative or disruptive emotions may be impaired, causing long-term harm to their physical, social, and emotional well-being. These adverse effects may include changes in a child’s emotional responses; ability to think, learn, and concentrate; impulse control; self-image; attachments to caregivers; and relationships with others. Traumatic experiences have been linked to a wide range of health-related conditions, including addiction, depression and anxiety, and risk-taking behavior, and may also increase the likelihood of chronic ill health conditions, such as obesity, diabetes, heart disease, cancer, and even early death. Not all children will experience all of these effects. Children’s responses to traumatic events are unique and affected by many factors, including their age at the time of the event, the frequency and perceived severity of trauma, and the child’s innate sensitivity, as well as protective factors such as the presence of positive relationships with healthy caregivers, physical health, and natural coping skills. While all children can be affected by trauma, trauma is common among children who enter the child welfare system. Many of these children have been abused or neglected, and involvement in the child welfare system, primarily through placements into a foster care home, may cause additional trauma due to the separation from family; changes in school placement, neighborhood, and community; as well as fear and uncertainty about the future. Child welfare experts generally believe that child welfare systems that use trauma-informed approaches are better able to address children’s safety, permanency, and well-being needs. Although trauma-informed frameworks may vary, they generally include interventions as well as a change in culture; thus if an agency or organization is taking a trauma-informed approach, it is incorporating knowledge of trauma and its effects into its policies, procedures, and practices. A trauma-informed child welfare system may offer services to help identify and mitigate the effects of trauma, including screening and assessing children for trauma, and providing or referring children to services. These approaches may produce improved outcomes for children in the child welfare system, including fewer children requiring crisis services, such as residential treatment, and fewer foster home placements, placement disruptions, and reentries into foster care. Other trauma-informed approaches may result in reduced lengths of stay in foster care and improved child functioning and increased well-being. In addition to child welfare agencies, school staff and members of the school community can play a key part in recognizing and responding to children who have experienced trauma. In a 2017 report on child well- being, GAO reported that an expert noted that health and human service agencies are not the only entities needed to address child well-being and suggested that community stakeholders work together to determine what resources are needed for the children in their community. A trauma- informed school, characterized by an understanding and a commitment of teachers and staff to an awareness of how trauma affects students, is an example of a coordinated approach to trauma. Trauma-informed teachers and staff are aware of trauma’s impact on students’ behavior, their relationships, their ability or inability to self-regulate behavior, and how it contributes to their classroom behavior. Specific elements of a trauma- informed school may include addressing and treating traumatic stress, developing partnerships with students and families, evaluating and revising school discipline policies and practices, and creating a trauma- informed learning environment. Trauma Treatments and Approaches Federal agencies, academic institutions, and community-based treatment centers have generated evidence-based trauma treatments that clinicians and therapists can use when working with children and their families. See table 1 for examples of treatments. Recent studies have also found that trauma-informed approaches that are infused into the practices and work of child welfare and school staff can help children, their families, and others. While these studies are limited in terms of the number of participants, they indicate the positive effects of including trauma-informed approaches into the work of child welfare staff and educators. For example, one study that used child welfare administrative data for about 1,500 children from Kansas found that implementing a trauma-informed approach was associated with improved child well-being and placement stability for children in foster care. Another study of two public child welfare agencies that involved 52 children, as well as child welfare staff, mental health providers, and foster parents and kinship caregivers, suggests, among other things, that fewer children exited foster homes for negative reasons, such as running away or moving to a group home, when families were trained in a trauma- informed approach. In addition, a study of 126 female youths residing in two treatment centers in Massachusetts suggests that the youth at the center receiving the trauma-informed approach experienced a reduction in post-traumatic stress disorder symptoms compared with the youth in the residential center that did not offer this approach. A study of five schools that adopted a trauma-sensitive approach also reported positive outcomes. For example, the study found a decrease in disciplinary actions, and staff at one school reported that the school felt safer and calmer. School staff also reported improved relations among colleagues and with students, as well as better relations between students and increased parent engagement. HHS and Education Provide Grants, Disseminate Information, and Fund Training and Technical Assistance to Help State and Local Agencies Support Children Affected by Trauma HHS and Education Provide Multiple Sources of Funding That State and Local Agencies Can Use to Support Children Affected by Trauma HHS’s ACF and SAMHSA have awarded discretionary grants to states specifically to address childhood trauma. From 2011 to 2013, ACF awarded 20 state and local agencies and other organizations discretionary grants to address childhood trauma, according to ACF officials, totaling about $58 million. Each grantee, including two state child welfare agencies and a county agency as well as two universities in five of the six states we selected to review, received up to 5 years of funding. The grants were used to screen and refer children to treatment, implement or expand trauma-focused, evidence-based treatments, and bridge the gap between child welfare and mental health. According to HHS officials, funding for the last of these grants will end in September 2019. SAMHSA also awards discretionary grants specifically to address childhood trauma to state and local agencies, universities, and other organizations through an initiative to transform mental health care for children and adolescents affected by trauma. The National Child Traumatic Stress Network (NCTSN), a collaborative network of experts created through the National Child Traumatic Stress Initiative (NCTSI), conducts research on trauma treatment approaches and provides services to children affected by trauma. In fiscal year 2017, SAMHSA received over $48 million for the NCTSN, and it awarded four new grants and supported 82 5-year grant continuations through NCTSI. Officials that we spoke with from one state child welfare agency, three universities, and two nonprofits in four of the selected states received grants through this initiative. Several of these entities used these funds to train clinicians and educate other child serving professionals about trauma and mental health conditions. In addition to grants that were specifically meant to address childhood trauma, the selected states used other HHS discretionary grants to support children affected by trauma. For example, officials from five state education agencies in the selected states told us that they received SAMHSA’s Project Advancing Wellness and Resilience Education (Project AWARE) grant. Wisconsin officials also said they received Education’s School Climate Transformation Grant, which was used to create the state’s trauma-sensitive schools initiative. Washington officials credited SAMHSA’s Mental Health Transformation Grant with driving the state’s initial trauma-informed work, including its guide about trauma in schools. State agency officials also reported using formula funds, meant for broad purposes like mental health, substance abuse, child welfare, and education, to support their work with children affected by trauma. Officials from five agencies in the selected states reported using formula funding from Title IV-E of the Social Security Act to help children affected by trauma. According to Colorado officials, the state’s Title IV-E waiver has allowed child welfare workers to screen, assess, and provide interventions that are trauma-informed. Also, North Carolina officials told us that Title IV-E, combined with other funding sources, has helped pay for trauma-informed learning communities to help counties build trauma- informed programming. Two states reported using the Substance Abuse and Mental Health Block Grants. (See table 2 for additional grants states reported using to support children affected by trauma.) In addition to federal funding, officials in the six selected states reported receiving state funding to support children affected by trauma. For example, officials in North Carolina told us that, in 2013, the North Carolina General Assembly appropriated $1.8 million in annually recurring funds to train clinicians in evidence-based trauma treatments. Also, in Massachusetts, state funding may be used to create and support trauma- sensitive initiatives in schools, among other things. In addition to state funding, officials in three of the selected states reported using nonprofit funding to support their efforts. HHS and Education Share Information and Fund Training and Technical Assistance to Help State and Local Agencies Support Children Affected by Trauma HHS offers information and funds training and technical assistance to help state and local agencies support children affected by trauma. For example, state and local child welfare officials in each of the six selected states cited the National Child Traumatic Stress Network (NCTSN) as an important resource for information, training, or technical assistance. State and local officials in four of the selected states told us that they use the NCTSN’s Child Welfare Trauma Training Toolkit curriculum to train their staff. The curriculum, designed to be completed in about 13 hours, covers topics such as the essential elements of a trauma-informed child welfare system, the impact of trauma on the brain and body, and the identification of trauma-related needs of children and families. Also, two state child welfare agencies told us that they use the Resource Parent Curriculum to train foster parents and others about trauma, and another used the Think Trauma curriculum to prepare trainers of group home and residential center staff; both curricula are provided through the NCTSN. In addition, the NCTSN makes other resources available to state and local communities on its website. For example, NCTSN offers fact sheets about various assessments and treatments, including those mentioned in table 1, as well as two evidence-based treatments for use in school settings. In addition to information and training provided through the NCTSN, in 2012, HHS’s ACF issued guidance to encourage state child welfare directors to focus on improving behavioral and social-emotional outcomes for children who have experienced abuse or neglect. In 2013, SAMHSA, in collaboration with ACF and CMS, issued joint guidance to encourage the integrated use of trauma-focused screening, functional assessments, and evidence-based practices in child-serving settings. Also, in 2014, SAMHSA, in an effort to help service sectors, such as child welfare, education, and juvenile justice, become more trauma-informed, released Concept of Trauma and Guidance for a Trauma-Informed Approach. This document included a framework of key assumptions and principles of a trauma-informed approach. SAMHSA intended that the trauma framework be relevant to its federal partners and their state and local system counterparts and to practitioners, researchers, and trauma survivors, families, and communities. (See table 3.) In addition to the information and training and technical assistance referenced above, HHS and Education fund technical assistance centers and make other resources available to states, including: SAMHSA’s National Center for Trauma-Informed Care and Alternatives to Seclusion and Restraint offers technical assistance to various publicly-funded systems and organizations on issues relating to trauma education, among other things. Education’s Readiness and Emergency Management for Schools Technical Assistance Center helps local education agencies before, during, and after emergency situations. Among its various activities, this technical assistance center offers information and technical assistance to local education agencies and others on Psychological First Aid for Schools, which is an intervention model to assist students, staff, and families in the immediate aftermath of an emergency. Education’s National Center on Safe Supportive Learning Environments as well as its Positive Behavioral Interventions and Supports Technical Assistance Center offer an array of materials about trauma and approaches to supporting children affected by it. ACF, through its Child Welfare Information Gateway website, provides information on building trauma-informed systems, assessing and treating trauma, and addressing secondary trauma in caseworkers. It also offers trauma resources for caseworkers, caregivers, and families, as well as information about trauma training. In some instances, the website directs users to SAMHSA or the NCTSN’s website. Selected States Use Various Approaches to Support Children Affected by Trauma Officials we spoke with in the six selected states told us they used a variety of approaches to help staff understand trauma and its effects on children, identify children affected by trauma, and provide support to them. These approaches range from training child welfare workers, educators, and clinicians to screening children for symptoms caused by traumatic experiences. They also include developing support systems, including providing services, to children and their families who need more help. While we did not evaluate the effectiveness of the selected state and county initiatives, many of them incorporate key trauma principles and activities cited in the SAMHSA framework above. For additional information on examples of approaches taken in each selected state and in selected counties, see appendixes I and II. Training State and local child welfare and education agency officials in the six selected states use various approaches to train staff and birth and foster parents about trauma and its effects on children and families. Child welfare officials in two states, Wisconsin and North Carolina, told us that they use learning communities to train staff, and in some instances, foster parents. For example, North Carolina’s child welfare agency used a learning community approach—which included face-to-face training, as well as coaching and practice, over an extended period—to work with child welfare staff in 32 of the state’s 100 counties, according to a state official. In a 2016 agency report, state officials reported that the 9- to 12- month learning community process was designed to allow staff the time required to become steeped in trauma knowledge, to learn how to spread that knowledge into skills and practices, and to develop a sustainable program. Conversely, state and local education and child welfare officials in three states told us that they use online learning or university coursework to train staff. For example, Wisconsin education agency officials told us that they developed a three-tiered training, including online modules for educators and school staff. The modules are designed for self-study and, among other things, include guidance on making policies and procedures more trauma-sensitive, as well as information about the characteristics of safe, supportive learning environments. Also, Massachusetts state child welfare officials told us that they partnered with three universities to provide trauma-focused courses to child welfare workers, and local school officials told us that a university offers a graduate certificate in trauma and learning to area educators. corroborated, when possible, the information we received during our state and county interviews with relevant state documents. We provided officials the opportunity to review the content for accuracy and provide revisions or corrections. a 10-hour, self-paced webinar. According to Wisconsin’s child welfare website, clinicians who complete the training are eligible for certification as TF-CBT therapists and can be listed on a national website of certified clinicians. Similarly, North Carolina’s state child welfare agency, in partnership with a nonprofit organization, trains clinicians in four trauma- focused, evidence-based therapies, including TF-CBT and Parent-Child Interaction Therapy. Similar to the Wisconsin effort, over the course of a year, clinicians learn about these therapies and practice them with children and families. Screening While training staff and parents is important to broaden understanding of trauma and its impact on affected children, identifying these children is also key to helping them receive needed support, including trauma- focused treatment. State and local child welfare and education officials in five of the six selected states told us that they screen certain children to determine whether they have experienced trauma, are exhibiting symptoms of trauma, or need to be referred for a trauma-informed mental health assessment. For example, North Carolina and Washington child welfare officials told us they screen children for trauma when they enter the child welfare system. North Carolina counties that participated in the state’s training efforts, described above, use two screening tools: one for children under age 6 and the other for those ages 6 through 21. The social worker, with input from the caregiver, completes the screening tool for children under age 6. Older children are asked questions about their exposure to trauma, including physical abuse, domestic violence, sexual abuse, and other traumatic events. According to the North Carolina child welfare agency, the trauma screen has a number of benefits for child welfare practice, including informing placement decisions for the youth, prioritizing children who might need to receive treatment quickly, and providing the mental health professional with a better understanding of a child’s issues. Child welfare officials in Washington also reported integrating trauma screening into the state’s child screening program, using a 2012 ACF trauma grant. Children and youth are screened within 30 days of placement in foster care if officials expect them to remain in care 30 days or more. With these grant funds, officials reported that Washington’s child welfare agency added a tool to screen for children’s trauma symptoms and developed a protocol that rescreens these children every 6 months. In addition, education agency officials from three states told us that schools have developed processes to identify students who may have experienced trauma. For example, one Wisconsin school district official told us that any staff member, family member, or student can refer a student for screening. This official explained that the school district formed school-based teams to review information, such as data on suspensions and class disruptions, to identify at-risk students. In addition to the screening process, the school district developed school-based and community mental health service partnerships at 23 schools where therapists provide mental health services, according to this official. Support Systems State and local child welfare and education agency officials in five of six selected states told us they have developed support systems, which can include providing services, to try to help children affected by trauma. For example, Colorado and Ohio child welfare agencies have spearheaded efforts to provide services and support to children who may have experienced trauma. The Colorado child welfare agency, as part of its system of care, uses an evidence- and team-based planning model, referred to as high-fidelity wraparound services, to manage care for children with or at risk of serious emotional disturbance and who are involved in multiple systems, such as the child welfare and juvenile justice systems. As part of these wraparound services, county child welfare staff and local service providers and professionals work with the family to create a plan for them and their children. A coordinator sets up meetings, oversees the plan, and makes sure all team members participate in achieving the plan’s goals. In addition to the coordinator, a family advocate provides peer support, via weekly visits, to parents and caregivers of youth receiving wraparound services. In addition, depending on the needs of the child, wraparound services may include participating in a support group or meeting with a therapist or grief counselor, among other things. In Ohio, child welfare officials in two counties told us about a partnership that provides services to children and their families who have experienced trauma because of parents’ substance use disorder. As part of the program, children and parents are screened for trauma and may get referred for treatment and services. Families receive wraparound services that are provided by a caseworker and family peer mentor; the family peer mentor has personal experiences with addiction and is in recovery. In addition, state education agency officials in four selected states told us that they had at least one statewide effort administered by the state education agency to help support all children, including those affected by trauma. Colorado, Washington, and Wisconsin encourage schools to implement tiered systems of behavioral support, according to state officials. Tiered systems of support generally consist of three tiers of support: (1) universal supports that apply to all children; (2) specialized supports for smaller groups of children; and (3) supports for individual children who need intensive interventions. To implement the first tier, school staff support students in various ways, such as interacting with students and setting up a dedicated space in a classroom for students to regulate their behavior. The second tier may include convening small groups to help children with similar behavioral issues learn how to regulate their emotions, and the last tier may include intensive support for students who need more help, such as developing and implementing wraparound services plans. School district officials that we spoke with in Massachusetts told us that although they do not use tiered systems of behavioral support, they help children affected by trauma by employing practices to create safe classroom environments for all students, such as developing and building upon relationships and engaging students in structured conversations. Child Welfare and Education Agencies in Selected States Identified Leadership and Capacity Limitations as Challenges to Supporting Children Affected by Trauma Officials in Selected States Reported That Leadership Is Important for Supporting Children Affected by Trauma Officials in all six selected states spoke of the importance of having engaged leadership in establishing and sustaining support for children affected by trauma. They cited a wide range of leaders, including state government officials; managers and supervisors; and those in partner agencies, such as schools or nonprofits, who supported these states’ trauma efforts. In some cases, these leaders helped establish new trauma initiatives. For example, Wisconsin’s former First Lady launched the work of a statewide, interagency trauma initiative. Additionally, Ohio county child welfare officials spoke about the value of obtaining management support for their plan to become a trauma-informed organization. In other cases, leaders were seen as important to sustaining trauma initiatives and ensuring their impact. In Massachusetts, university officials said that, to ensure the continued availability of evidence-based therapies, they train not only clinicians, but also the individuals who supervise them. Also, a county public health official in Washington, whose agency is implementing trauma initiatives in schools, told us that their efforts tend to be unsuccessful unless they first engage school leadership and align their health initiatives with the schools’ existing efforts. Federal officials and reports have also cited leadership as an important factor in the implementation of trauma initiatives, with some maintaining that leadership is necessary to support children affected by trauma because of the need to change an organization’s culture. In 2013, NCTSN reported on takeaways from a learning collaborative in which nine teams led by child welfare agencies developed, implemented, and tested trauma-informed child welfare practices. Based on the experiences of the teams, the NCTSN report stated that strong and consistent leadership is necessary to implement trauma-informed practice because it requires a shift in organizational culture. SAMHSA’s 2014 guidance for a trauma-informed approach similarly suggests that organizations consider the importance of leadership to initiate a systems- wide change. In addition, HHS officials, who worked with states on a series of trauma-related grants awarded between 2011 and 2013, also told us that leadership commitment was important for their grantees in building organizational and worker resiliency, acting upon data and evaluation, and sustaining initiatives. These documents and statements echo previous GAO work on organizational transformation; for example, in 2003 we reported on key practices found at the center of successful transformation efforts, noting that leadership must set the direction, pace, and tone and provide a clear, consistent rationale that brings everyone together behind a single mission. In addition to discussing the important role that leadership plays in establishing and sustaining support for children affected by trauma, officials in three states highlighted instances in which a lack of leadership hindered their efforts to support these children. The cases they described included delayed, incomplete, or unsuccessful implementation of trauma initiatives. Delayed implementation. Officials in one school district said they had developed policies around multi-tiered system of supports in 2009 but did not receive support from political leaders or funding for the initiative until 2016. They told us that this hindered the initiative’s implementation. Incomplete implementation. State education officials in that same state said that a lack of leadership hindered their ability to track school districts’ implementation of the state’s trauma initiatives. These officials said that a lack of requirements for districts to scale up trauma work was a barrier to collecting data on local activities. In another state, there was a county child welfare initiative to implement universal trauma screening which was conducted in partnership with a local university. The university reported that less than half of children with open cases were screened during the project period, which university officials attributed to some supervisors not supporting the screening initiative. Unsuccessful implementation. According to officials in a third state, turnover among high-level leaders contributed to difficulties integrating trauma-informed practices at the state’s child welfare agency, and the agency was not successful at implementing a trauma screening process. Child Welfare and Education Officials in Selected States Also Reported Capacity Limitations and Other Challenges to Supporting Children Affected by Trauma Capacity Limitations Officials in all six selected states talked about limitations on their agency’s or organization’s capacity to support children affected by trauma. Limitations included high rates of staff turnover, limited staff time to focus on trauma, insufficient numbers of clinicians trained in trauma-focused, evidence-based therapies, and insufficient funding for trauma initiatives. Some agencies and organizations had taken actions to address these challenges. Secondary Traumatic Stress According to the National Child Traumatic Stress Network (NCTSN), Secondary Traumatic Stress (STS) is the emotional duress experienced when hearing about another person’s traumatic experiences. Professionals working with children affected by trauma, such as child welfare workers, are commonly at risk of developing STS. STS can compromise these professionals’ ability to do their jobs and may drive them to leave their job or their professional field. NCTSN notes that several factors can increase the risk for developing STS, including heavy caseloads of children affected by trauma, social or organizational isolation, and feeling unprepared for the job due to lack of training. NCTSN suggests taking a multi- dimensional approach to STS, which includes both prevention and intervention. This could include strategies such as establishing self- care groups, helping workers maintain work- life balance, and training organizational leaders on STS. education agencies. Child welfare officials in all six states talked about high rates of staff turnover, while education officials did so in two states (Colorado and Wisconsin). Staff turnover resulted in difficulties maintaining staff trained in trauma-informed approaches and sustaining institutional trauma knowledge and trauma-related activities, according to officials. Colorado university officials partnering with a county child welfare agency said that staff turnover forced them to invest additional time in training replacement staff and made it more difficult for child welfare officials to conduct regular follow-ups. Similarly, one education official in another part of Colorado said that high turnover at many agencies, including education and child welfare, hindered the county’s efforts to maintain institutional knowledge about trauma-informed practices and sustain the services these agencies were providing to children affected by trauma. Some state and local officials in three states attributed high rates of staff turnover to fatigue and secondary traumatic stress, which is the emotional duress that staff may experience when they hear about children’s traumatic experiences (see sidebar). Some agencies said that they sought to address staff turnover by supporting employees through training on secondary traumatic stress; at least one agency in each of the six states offered such training. Officials from Ohio and Wisconsin told us that another way they were addressing the issue was by participating in an HHS-funded project to improve child welfare workforce outcomes. Many agencies also said they faced limitations on the time that staff could dedicate to trauma initiatives. This issue was more commonly raised by education agencies than by child welfare agencies. Education agency officials reported this limitation in three of four states that had education initiatives, whereas child welfare officials reported it in two of the six selected states. Some of these officials explained that lack of staff time to focus on trauma may have limited the implementation of their trauma initiatives. State education officials in Washington and local education officials in Massachusetts told us that they have the expertise to provide trauma training to schools and community groups, but time limitations restrict their ability to do so. A Colorado county child welfare official told us that some caseworkers see trauma screening as an additional burden due to their already large workload, and a child welfare official in another Colorado county told us that many caseworkers forget to do trauma screening because they are busy. At least one agency we interviewed in each of the six states has or had a staff position dedicated to trauma work, which could help address this limitation. Officials in all six selected states said that there were not enough clinicians trained in trauma-focused, evidence-based therapies to serve children affected by trauma. GAO has previously reported on difficulties finding specialty care for children. For example, in 2017 we found that limited access to mental health services was a challenge for several selected states due to a variety of factors, including insufficient numbers of providers in certain specialties, such as child psychiatrists. Some officials indicated that a shortage of clinicians trained in trauma-focused, evidence-based therapies can limit the ability of child welfare agencies to address trauma. For example, state child welfare officials in Massachusetts specifically noted that identifying children affected by trauma is not helpful if there are not enough clinicians trained in these therapies to treat them. County child welfare officials in Massachusetts and local healthcare partners in Ohio said that providers sometimes rely on interns to address the shortage of clinicians, but Massachusetts officials viewed this as problematic because interns have short tenures that prevent them from establishing relationships with the children. Officials in five of the six selected states told us about initiatives to address the shortage by training clinicians in trauma-focused, evidence- based therapies, and university officials in Massachusetts described an initiative to make trained clinicians more accessible. (See text box.) LINK-KID: A centralized trauma treatment referral service The Child Trauma Training Center at the University of Massachusetts Medical School trains clinicians and operates a centralized referral service called LINK-KID. The goal of LINK-KID is to facilitate connections between children in need of trauma-focused, evidence- based therapies and clinicians who have been trained to provide such therapies. LINK-KID maintains an active database of trained clinicians throughout the state of Massachusetts. University officials told us that anyone in Massachusetts with concerns about a child, including family, teachers, clinicians, and child welfare workers, may call the service. LINK-KID collects information about the child and family, works with them to decide which treatment is most appropriate, and ensures the child is referred for that treatment. University officials said that using LINK-KID is easier for families and child welfare workers, who otherwise might have to call multiple service providers to determine who offers the needed treatment and accepts their insurance. These officials also said they have seen a reduction in the time children must wait for treatment when using LINK-KID. They said that prior to LINK-KID, they saw many children waiting 6 months to a year to receive treatment after having been identified as having experienced trauma, whereas wait times are generally between 25 and 40 business days with LINK-KID. Finally, some agencies said they had difficulties getting or maintaining sufficient funding to support trauma initiatives. Officials in Washington, including, among others, state and local education officials and a local public health partner, reported this issue. In addition, local officials in four other states noted limited funding to support trauma initiatives. School district officials in Washington indicated that a lack of funding limited their implementation support for one major trauma initiative to approximately one-quarter of their schools. These schools were chosen based on need, as demonstrated by measures such as discipline and absenteeism rates. County child welfare officials in Ohio said they had to stop one of their trauma initiatives 3 years ago because the state funding supporting the initiative ran out. Those Ohio officials said they have relied on relationships and collaboration to address the issue of scarce funding. For example, they said that county organizations, including local government agencies, private healthcare providers, and nonprofits, share data extensively and pool funding to support various initiatives. One initiative they pointed to is a local interagency council which provides services to children affected by trauma. Other Challenges Child welfare and other officials in the six selected states, including officials with nonprofit partners, a state department of health, and a state interagency collaborative, also raised at least one other challenge. Challenges included sharing data while remaining in compliance with state and federal privacy laws; sharing data across incompatible systems; limitations on services billable to Medicaid; and Medicaid reimbursement rates. Some agencies had taken actions to address or avoid data sharing challenges. In the states where child welfare officials identified Medicaid- related challenges, state Medicaid officials offered a different perspective on perceived Medicaid challenges and cited alternative ways to support children affected by trauma. Officials in all six states talked about sharing data with other agencies for various purposes; however, privacy laws and regulations were sometimes cited by these officials as a barrier to sharing data about children affected by trauma. For example, officials in two Massachusetts school districts told us they are notified by police or child welfare workers when a child has been involved in an incident with those agencies. One official described the goal of this effort as making staff aware of incidents and events that may affect children’s learning and behavior and ensuring that children feel supported. However, child welfare officials in four of the six selected states and other officials in two states said that it was difficult to share data while remaining in compliance with state and federal privacy and confidentiality laws and regulations, though the reasons they cited for these difficulties varied. State child welfare officials in Massachusetts told us that the state has strict privacy laws in addition to federal laws such as the Health Insurance Portability and Accountability Act of 1996. These officials said that data sharing is possible but generally requires a specific memorandum of understanding because of privacy laws. In contrast, a state child welfare official in North Carolina said they had difficulties with counties not understanding what data they are allowed to share. That official told us that the state tries to mitigate this challenge by helping counties understand what they can share and encouraging them to share screening information with mental health and medical providers. Additionally, a North Carolina university has published state-specific guidance on sharing education, mental health, and other records. Systems incompatibility and technology issues were also sometimes seen as barriers to sharing data about children affected by trauma. Child welfare officials in three of the six selected states, and state health officials in a fourth state, said that incompatibility among various systems made data sharing very difficult or impossible. For example, county officials in Wisconsin said that the state’s child welfare and juvenile justice offices use one data reporting system while the state’s mental and behavioral health offices use another, and these two statewide data systems are unable to communicate. While state child welfare officials in Colorado also reported systems incompatibility issues, county child welfare officials in that state talked about efforts to make data systems more accessible to relevant partners. Officials in one county said that they have a database which is accessible by all members of the county’s multi- agency partnership, including child welfare, school districts, public health, and others. Those officials also said they use a universal release-of- information which includes all partner agencies, enabling them to share data at multi-agency meetings. Additionally, child welfare officials in Colorado, Ohio, and Massachusetts said that certain services for children affected by trauma or certain service providers were not billable to Medicaid, although Medicaid officials in these states offered a different perspective and cited alternative ways to support these children. Depending on the state, child welfare officials said they could not bill wraparound services, trauma assessments, transportation, or non-traditional therapies, such as animal therapy or community and relationship building. County child welfare officials in Ohio also mentioned restrictions on providers; they said that potential peer support specialists with a criminal background and interns could not bill Medicaid. However, Medicaid officials in these states generally said that such services were billable to Medicaid, and Ohio Medicaid officials said that interns and those with a criminal background could bill Medicaid, under certain circumstances. For example, they said that while certain severe criminal offenses, such as homicide, could exclude someone from providing services, those with lesser offenses could become eligible after a waiting period. Colorado and Ohio Medicaid officials we spoke with offered some alternative ways to use Medicaid to support children affected by trauma in cases where services could not be billed to Medicaid. For example, a Colorado Medicaid official and a child welfare official both said that Medicaid does not pay providers for travel time or mileage and that this can be a problem in rural areas; however, the state Medicaid official said that telehealth is available to address this issue and that reimbursement rates for services in rural areas can be higher to reflect the additional cost of travel. Finally, child welfare and Medicaid officials in Colorado and North Carolina also had different perspectives regarding Medicaid reimbursement rates. Child welfare and other officials in these states said that certain services for children affected by trauma, such as trauma assessments and trauma-focused, evidence-based therapies, are expensive, and that Medicaid reimbursement rates are too low to incentivize providers to offer these services. However, Colorado and North Carolina Medicaid officials explained that most children in Medicaid in their states receive mental health care through managed care, where the state pays a set rate per child to managed care organizations (MCOs) to provide or arrange for any mental health services a child may need, including trauma-related care. MCOs, in turn, reimburse providers for the services they deliver, and MCOs set the rates they pay providers for those services rather than the state. Medicaid officials in Colorado and North Carolina noted that MCOs have flexibility to negotiate rates with providers and may choose to reimburse at a higher rate. North Carolina Medicaid officials said that some MCOs in their state were reimbursing providers at a higher rate for comprehensive, trauma-informed mental health assessments, and a Colorado Medicaid official also noted that MCOs in their state may vary reimbursement rates based on provider availability, offering higher rates in areas where there are shortages. Agency Comments We provided a draft of this report to HHS and Education for review and comment. HHS did not provide written comments. Education provided technical comments, which were incorporated into the report as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the Secretaries of HHS and Education, congressional committees, and other interested parties. In addition, this report will be available at no charge on the GAO website at https://www.gao.gov If you or your staff have any questions about this report, please contact me at (202) 512-7215 or larink@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV. Appendix I: Selected State Information Appendix II: Selected County Information Appendix III: GAO Contact and Staff Acknowledgments GAO Contact Staff Acknowledgments In addition to the contact named above, Elizabeth Morrison (Assistant Director), Ramona L. Burton (Analyst-In-Charge), Isabella Guyott, and Robin Marion made significant contributions to this report. Also contributing to this report were Luqman Abdullah, Susan Aschoff, Sarah Cornetto, Kelsey Kreider, Hannah S. Locke, Jean McSween, Mimi Nguyen, Stacy Ouellette, Michelle Rosenberg, Almeta Spencer, Daren K. Sweeney, Shelia L. Thorpe, and Carolyn Yocom.


Introduction The U.S. farm sector is vast and varied. It encompasses production activities related to traditional field crops (such as corn, soybeans, wheat, and cotton) and livestock and poultry products (including meat, dairy, and eggs), as well as fruits, tree nuts, and vegetables. In addition, U.S. agricultural output includes greenhouse and nursery products, forest products, custom work, machine hire, and other farm-related activities. The intensity and economic importance of each of these activities, as well as their underlying market structure and production processes, vary regionally based on the agro-climatic setting, market conditions, and other factors. As a result, farm income and rural economic conditions may vary substantially across the United States. Annual U.S. net farm income is the single most watched indicator of farm sector well-being, as it captures and reflects the entirety of economic activity across the range of production processes, input expenses, and marketing conditions that have prevailed during a specific time period. When national net farm income is reported together with a measure of the national farm debt-to-asset ratio, the two summary statistics provide a quick and widely referenced indicator of the economic well-being of the national farm economy. USDA's November 2019 Farm Income Forecast In the third of three official U.S. farm income outlook releases scheduled for 2019 (see shaded box below), ERS projects that U.S. net farm income will rise 10.2% in 2019 to $92.5 billion, up $8.5 billion from last year. Net cash income (calculated on a cash-flow basis) is also projected higher in 2019 (+15.0%) at $119.0 billion. The November forecast of $92.5 billion is 6.3% above the 10-year average of $87.0 billion but is well below 2013's record high of $123.7 billion. The November 2019 net farm income forecast represents an increase from both USDA's preliminary March 2019 forecast of $69.4 billion, and the August 2019 forecast of $88.0 billion ( Table A-1 ). The initial March forecast did not anticipate the second round of MFP payments (valued at up to $14.5 billion). The increase in government support in 2019, projected at $22.4 billion and up 64.0% from 2018, is the principal driver behind the rise in net farm incomeâboth year-to-year and from the previous two forecasts. Support from traditional farm programs is expected to be bolstered by large direct government payments in response to trade retaliation under the trade war with China. Direct government payments of $22.4 billion in 2019, if realized, would represent 24.2% of net farm incomeâthe largest share since a 27.6% share in 2006. Highlights For historical perspective, both net cash income and net farm income achieved record highs in 2013 but fell to recent lows in 2016 ( Figure 1 ) before trending higher in each of the past three years (2017, 2018, and 2019). When adjusted for inflation and represented in 2019 dollars ( Figure 2 ), the net farm income for 2019 is projected to be on par with the average of $86.8 billion for net farm income since 1940. Global demand for U.S. agricultural exports ( Figure 18 ) is projected at $134.5 billion in 2019, down from 2018 (-6.2%), due largely to a decline in sales to China. Farm asset values and debt levels are projected to reach record levels in 2019âasset values at $3.1 trillion (+2.1%) and farm debt at $415.5 billion (+3.4%)âpushing the projected debt-to-asset ratio up to 13.5%, the highest level since 2003 ( Figure 23 ). For 2019, USDA forecasts that prices for most major commoditiesâbarley, soybeans, sorghum, oats, rice, hogs, and milkâwill be up slightly from 2018, while cotton, wheat, choice steers, broilers, and eggs are expected to be lower ( Table A-4 ). However, these projections are subject to substantial uncertainty associated with international commodity markets. Three Major Factors Dominate the 2019 Farm Income Outlook Abundant domestic and international supplies of grains and oilseeds contributed to a fifth straight year of relatively weak commodity prices in 2019 ( Figure A-1 through Figure A-4 , and Table A-4 ). Furthermore, prospects for market conditions heading into 2020 remain uncertain. Three major factors have dominated U.S. agricultural markets during 2019, and have contributed to uncertainty over both supply and demand prospects, as well as market prices, heading into 2020. First, large domestic supplies of corn, soybeans, wheat, and cotton were carried over into 2019 ( Figure 3 ). Large corn and soybean stocks have kept pressure on commodity prices throughout the grain and feed complex in 2019. Second, adverse weather conditions during the spring planting and fall harvesting periods have contributed to market uncertainty regarding the size of the 2019 corn and soybean crops. Third, the U.S.-China trade dispute has led to declines in U.S. exports to Chinaâa major market for U.S. agricultural productsâand added to market uncertainty. In particular, the United States lost its dominant role in the world's preeminent market for soybeansâChina. It is unclear how soon, if at all, the United States may resolve its trade dispute with China or how international demand may evolve heading into 2020. Large Corn and Soybean Stocks Continue to Dominate Commodity Markets Corn and soybeans are the two largest U.S. commercial crops in terms of both value and acreage. For the past several years, U.S. corn and soybean crops have experienced strong growth in both productivity and output, thus helping to build stockpiles at the end of the marketing year. In 2018, U.S. farmers produced a record U.S. soybean harvest of 4.5 billion bushels and record ending stocks (913 million bushels or a 23.0% stocks-to-use ratio) that year ( Figure 3 ). The record soybean harvest in 2018, combined with the sudden loss of the Chinese soybean market (as discussed in the " Agricultural Trade Outlook " section of this report), kept downward pressure on U.S. soybean prices. A smaller crop and lower stocks are projected for 2019; however, the reduction in volume of U.S. soybean exports to China has prevented a major price recovery. Similarly, several consecutive years of bumper U.S. corn crops have built domestic corn supplies. U.S. corn ending stocks in 2019 are projected to approach or surpass 2 billion bushels for the fourth consecutive year. U.S. wheat and cotton supplies are also projected to remain high relative to use, thus keeping downward pressure on farm prices. Poor Weather for Planting, Harvesting U.S. Corn and Soybean Crops U.S. agricultural production activity got off to a late start in 2019 due to prolonged cool, wet conditions throughout the major growing regions, particularly in states across the eastern Corn Belt and the Dakotas. This resulted in record large "prevented plant" acres (reported at 19.6 million acres by the Farm Service Agency) and delays in the planting of the corn and soybean crops, especially in Illinois, Michigan, Ohio, Wisconsin, and North and South Dakota. Traditionally, 96% of the U.S. corn crop is planted by June 2, but in 2019 67% of the crop had been planted by that date. Similarly, the U.S. soybean crop was planted with substantial delays. By June 16, 77% of the U.S. soybean crop was planted, whereas an average of 93% of the crop has been planted by that date during the past five years. These planting delays have significant implications for crop development because they push both crops' growing cycle into hotter, drier periods of the summer than usual and increase the risk of plant growth being shut off by an early freeze, thus preventing the plants from achieving their maximum yield potential. Then, in the fall, early bouts of cold, wet conditions delayed corn and soybean harvests in the Western Corn Belt and produced high-moisture crops, requiring costly drying prior to storage. Many farmers left crops in the field unharvested due to wet fields or the lack of access to sufficient propane to dry wet crops. As of December 2, 2019, nearly 11% of the corn crop remained unharvested. Diminished Trade Prospects Contribute to Market Uncertainty The United States is traditionally one of the world's leading exporters of corn, soybeans, and soybean productsâvegetable oil and meal. During the recent five-year period from marketing year 2013/2014 to 2017/2018, the United States exported 49% of its soybean production and 15% of its corn crop. Thus, the export outlook for both of these crops is critical to farm sector profitability and regional economic activity across large swaths of the United States as well as in international markets. However, the tariff-related trade dispute between the United States and China (as well as several other major trading partners) has resulted in lower purchases of U.S. agricultural products by China in calendar years 2018 and 2019, and has cast uncertainty over the outlook for the U.S. agricultural sector, including the corn and soybean markets. Livestock Outlook for 2019 and 2020 Because the livestock sectors (particularly dairy and cattle, but hogs and poultry to a lesser degree) have longer biological lags and often require large capital investments up front, they are slower to adjust to changing market conditions than is the crop sector. As a result, USDA projects livestock and dairy production and prices an extra year into the future (compared with the crop sector) through 2020, and market participants consider this expanded outlook when deciding their market interactionsâbuy, sell, invest, etc. Background on the U.S. Cattle-Beef Sector During the 2007-2014 period, high feed and forage prices plus widespread drought in the Southern Plainsâthe largest U.S. cattle production regionâresulted in an 8% contraction of the U.S. cattle inventory. Reduced beef supplies led to higher producer and consumer prices and record profitability among cow-calf producers in 2014. This was coupled with then-improved forage conditions, all of which helped to trigger the slow rebuilding phase in the cattle cycle that started in 2014 ( Figure 4 ). The expansion continued through 2018, despite weakening profitability, primarily due to the lag in the biological response to the strong market price signals of late 2014. The cattle expansion appears to have levelled off in 2019, with the estimated cattle and calf population unchanged from a year earlier at 103 million. Another factor working against continued expansion in cattle numbers is that producers are now producing more beef with fewer cattle as a result of heavier weights for marketed cattle. Robust Production Growth Projected Across the Livestock Sector Similar to the cattle sector, U.S. hog and poultry flocks have been growing in recent years and are expected to continue to expand in 2019. For 2019, USDA projects production of beef (+0.6%), pork (+5.0%), broilers (+2.7%), and eggs (+2.5%) to expand robustly heading into 2020. This growth in protein production is expected to be followed by continued positive growth rates in 2020: beef (+1.9%), pork (+3.8%), broilers (+1.8%), and eggs (+0.8%). A key uncertainty for the meat-producing sector is whether demand will expand rapidly enough to absorb the continued growth in output or whether surplus production will begin to pressure prices lower. USDA projects that combined domestic and export demand for 2019 will continue to grow for red meat (+6.2%)âdriven primarily by demand for pork productsâbut flatten for poultry (+0.0%). Livestock-Price-to-Feed-Cost Ratios Signal Profitability Outlook The changing conditions for the U.S. livestock sector may be tracked by the evolution of the ratios of livestock output prices to feed costs ( Figure 5 ). A higher ratio suggests greater profitability for producers. The cattle-, hog-, and broiler-to-feed margins have all exhibited significant volatility during the 2017-2019 period. The hog, broiler, and cattle feed ratios have trended downward during 2018 and 2019, suggesting eroding profitability. The milk-to-feed price ratio has trended upward from mid-2018 into 2019. While this result varies widely across the United States, many small or marginally profitable cattle, hog, broiler, and milk producers face continued financial difficulties. Continued production growth of between 1% and 4% for red meat and poultry suggests that prices are vulnerable to weakness in demand. However, USDA projects that the price outlook for cattle, hogs, and poultry is expected to turn upward in 2020 ( Table A-4 ). Similarly, U.S. milk production is projected to continue growing in 2019 (+0.5%) and 2020 (+1.7%). Despite this growth, USDA projects U.S. milk prices up in both 2019 (+14.4%) and 2020 (1.3%). Gross Cash Income Highlights Projected farm-sector revenue sources in 2019 include crop revenues (46% of sector revenues), livestock receipts (41%), government payments (5%), and other farm-related income (8%), including crop insurance indemnities, machine hire, and custom work. Total farm sector gross cash income for 2019 is projected to be up (+3.9%) to $431.0 billion, driven by increases in both direct government payments (+64.0%) and other farm-related income (+18.1%). Cash receipts from crop receipts (+1.0%) and livestock product (+0.1%) are up (+0.6%) in the aggregate ( Figure 6 ). Crop Receipts Total crop sales peaked in 2012 at $231.6 billion when a nationwide drought pushed commodity prices to record or near-record levels. In 2019, crop sales are projected at $197.4 billion, up 1.0% from 2018 ( Figure 7 ). Projections for 2019 and percentage changes from 2018 include Feed cropsâcorn, barley, oats, sorghum, and hay: $59.6 billion (+4.5%); Oil cropsâsoybeans, peanuts, and other oilseeds: $37.6 billion (-5.2%); Fruits and nuts: $29.4 billion (+1.3%); Vegetables and melons: $20.4 billion (+10.0%); Food grainsâwheat and rice: $11.3 billion (-7.2%); Cotton: $7.4 billion (-8.5%); and Other crops including tobacco, sugar, greenhouse, and nursery: $31.3 billion (+3.4%). Livestock Receipts The livestock sector includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector grew steadily from 2009 to 2014, when it peaked at a record $212.3 billion. However, the sector turned downward in 2015 (-10.7%) and again in 2016 (-14.1%), driven largely by projected year-over-year price declines across major livestock categories ( Table A-4 and Figure 9 ). In 2017, livestock sector cash receipts recovered with year-to-year growth of 8.1% to $175.6 billion. In 2018, cash receipts increased slightly (+0.6%). In 2019, cash receipts are projected up slightly (+0.1%) for the sector at $176.8 billion as increased hog and dairy sales offset declines in poultry and cattle. Projections for 2019 (and percentage changes from 2018) include Cattle and calf sales: $66.5 billion (-0.9%); Poultry and egg sales: $40.0 billion (-13.6%); Dairy sales: valued at $39.9 billion (+13.2%); Hog sales: $23.5 billion (+11.2%); and Miscellaneous livestock: valued at $7.0 billion (+2.1%). Government Payments Historically, government payments have included Direct payments (decoupled payments based on historical planted acres), Price-contingent payments (program outlays linked to market conditions), Conservation payments (including the Conservation Reserve Program and other environmental-based outlays), Ad hoc and emergency disaster assistance payments (including emergency supplemental crop and livestock disaster payments and market loss assistance payments for relief of low commodity prices), and Other miscellaneous outlays (including market facilitation payments, cotton ginning cost-share, biomass crop assistance program, peanut quota buyout, milk income loss, tobacco transition, and other miscellaneous payments). Projected government payments of $22.4 billion in 2019 would be up 64.0% from 2018 and would be the largest taxpayer transfer to the agriculture sector (in absolute dollars) since 2005 ( Figure 11 and Table A-1 ). The projected surge in federal subsidies is driven by large "trade-damage" payments made under the MFP initiated by USDA in response to the U.S.-China trade dispute. MFP payments (reported to be $14.3 billion) in 2019 include outlays from the 2018 MFP program that were not received by producers until 2019, as well as expected payments under the first and second tranches of the 2019 MFP program. USDA ad hoc disaster assistance is projected higher year-over-year at $1.7 billion (+90.7%). Most of the $1.7 billion comes from a new, temporary program, the Wildfire and Hurricane Indemnity Program Plus (WHIP+) enacted through the Disaster Relief Act of 2019 ( P.L. 116-20 ). Payments under the Agricultural Risk Coverage and Price Loss Coverage programs are projected lower (-19.0%) in 2019 at a combined $2.6 billion compared with an estimated $3.2 billion in 2018 (see "Price Contingent" in Figure 11 ). Conservation programs include all conservation programs operated by USDA's Farm Service Agency and the Natural Resources Conservation Service that provide direct payments to producers. Estimated conservation payments of $3.5 billion are forecast for 2019, down (-11.3%) from $4.0 billion in 2018. Total government payments of $22.4 billion represents a 5% share of projected gross cash income of $425.3 billion in 2019 ( Figure 6 ). In contrast, government payments are expected to represent 24% of the projected net farm income of $92.5 billion. If realized, this would be the largest share since 2006 ( Figure 12 ). The government share of net farm income reached a peak of 65.2% in 1984 during the height of the farm crisis of the 1980s. The importance of government payments as a percentage of net farm income varies nationally by crop and livestock sector and by region. Dairy Margin Coverage Program Outlook The 2018 farm bill ( P.L. 115-334 ) made several changes to the previous Margin Protection Program (MPP), including a new nameâthe Dairy Margin Coverage (DMC) programâand expanded margin coverage choices from the original range of $4.00-$8.00 per hundredweight (cwt.). Under the 2018 farm bill, milk producers have the option of covering the milk-to-feed margin up to a threshold of $9.50/cwt. on the first 5 million pounds of milk coverage. The DMC margin differs from the USDA-reported milk-to-feed ratio (shown in Figure 5 ), but reflects the same market forces. As of October 2019, the formula-based milk-to-feed margin used to determine government payments had risen to $10.88/cwt., above the newly instituted $9.50/cwt. payment threshold ( Figure 13 ), thus decreasing the likelihood that DMC payments might be available in the second half of 2019. In total, the DMC program is expected to make $214 million in payments in 2019, down from $250 million under the previous MPP in 2018. Production Expenses Total production expenses for 2019 for the U.S. agricultural sector are projected to be up slightly (+0.2%) from 2018 in nominal dollars at $344.6 billion ( Figure 14 ). Production expenses peaked in both nominal and inflation-adjusted dollars in 2014, then declined for five consecutive years in inflation-adjusted dollars. However, in nominal dollars production expenses are projected to turn upward in 2019. Production expenses affect crop and livestock farms differently. The principal expenses for livestock farms are feed costs, purchases of feeder animals and poultry, and hired labor. Feed costs, labor expenses, and property taxes are all projected up in 2019 ( Figure 15 ). In contrast, fuel, seed, pesticides, interest, and fertilizer costsâall major crop production expensesâare projected lower. But how have production expenses moved relative to revenues? A comparison of the indexes of prices paid (an indicator of expenses) versus prices received (an indicator of revenues) reveals that the prices received index generally declined from 2014 through 2016, rebounded in 2017, then declined again in 2019 ( Figure 16 ). Farm input prices (as reflected by the prices paid index) showed a similar pattern but with a smaller decline from their 2014 peak and have climbed steadily since mid-2016, suggesting that farm sector profit margins have been squeezed since 2016. Cash Rental Rates Renting or leasing land is a way for young or beginning farmers to enter agriculture without incurring debt associated with land purchases. It is also a means for existing farm operations to adjust production more quickly in response to changing market and production conditions while avoiding risks associated with land ownership. The share of rented farmland varies widely by region and production activity. However, for some farms it constitutes an important component of farm operating expenses. Since 2002, about 39% of agricultural land used in U.S. farming operations has been rented. The majority of rented land in farms is rented from nonoperating landlords. Nationally in 2017, 29% of all land in farms was rented from someone other than a farm operator. Some farmland is rented from other farm operationsânationally about 8% of all land in farms in 2017 (the most recent year for which data are available)âand thus constitutes a source of income for some operator landlords. Total net rent to nonoperator landlords is projected to be down (-1.2%) to $12.7 billion in 2019. Average cash rental rates for 2019 were up (+1.4%) year-over-year ($140 per acre versus $138 in 2018). Farm rental rates are generally set during the preceding fall or in early spring prior to field work. National average rental rates dipped in 2016, but continue to reflect the high crop prices and large net returns of the preceding several years, especially the 2011-2014 period ( Figure 17 ). The national rental rate for cropland peaked at $144 per acre in 2015. Agricultural Trade Outlook U.S. agricultural exports have been a major contributor to farm income, especially since 2005. As a result, the financial success of the U.S. agricultural sector is strongly linked to international demand for U.S. products. Because of this strong linkage, the downturn in U.S. agricultural exports that started in 2015 ( Figure 18 ) deepened the downturn in farm income that ran from 2013 through 2016 ( Figure 1 ). Since 2018, the U.S. agricultural sector's trade outlook has been vulnerable to several international trade disputes, particularly the ongoing dispute between the United States and China. A return to market-based farm income growth for the U.S. agricultural sector would likely need improved international trade prospects. Key U.S. Agricultural Trade Highlights USDA projects U.S. agricultural exports at $135.5 billion in FY2019, down (-5.5%) from $143.4 billion in FY2018. Export data include processed and unprocessed agricultural products. This aggregate downturn masks larger country-level changes that have occurred as a result of ongoing trade disputes (discussed below). In FY2019, U.S. agricultural imports are projected up at $113.0 billion (+2.7%), and the resultant agricultural trade surplus of $7.0 billion would be the lowest since 2006. A substantial portion of the surge in U.S. agricultural exports that occurred between 2010 and 2014 was due to higher-priced grain and feed shipments, including record oilseed exports to China and growing animal product exports to East Asia. As commodity prices have leveled off, so too have export values (see the commodity price indexes in Figure A-1 and Figure A-2 ). In FY2017, the top three markets for U.S. agricultural exports were China, Canada, and Mexico, in that order. Together, these three countries accounted for 47% of total U.S. agricultural exports during the five-year period FY2013-FY2017 ( Figure 19 ). However, in FY2019 the combined share of U.S. exports taken by China, Canada, and Mexico is projected down to 40% largely due to lower exports to China. The ordering of the top markets in 2019 is projected to be Canada, Mexico, the European Union (EU), Japan, and China, as China is projected to decline as a destination for U.S. agricultural exports. From FY2013 through FY2017, China imported an average of $26.4 billion of U.S. agricultural products. However, USDA reported that China's imports of U.S. agricultural products declined to $20.5 billion in FY2018, and are projected to decline further to $13.6 billion in FY2019 as a result of the U.S.-China trade dispute. The fourth- and fifth-largest U.S. export markets have traditionally been the EU and Japan, which accounted for a combined 17% of U.S. agricultural exports during the FY2014 to FY2018 period. These two markets have shown limited growth in recent years when compared with the rest of the world. However, their combined share is projected to grow slightly to 18% in FY2019 ( Figure 19 ). The "Rest of World" (ROW) component of U.S. agricultural tradeâSouth and Central America, the Middle East, Africa, and Southeast Asiaâhas shown strong import growth in recent years. ROW is expected to account for 42% of U.S. agricultural exports in FY2019. ROW import growth is being driven in part by both population and GDP growth but also from shifting trade patterns as some U.S. products previously targeting China have been diverted to new ROW markets. Over the past four decades, U.S. agricultural exports have experienced fairly steady growth in shipments of high-value productsâincluding horticultural products, livestock, poultry, and dairy. High-valued exports are forecast at $100.1 billion for a 73.8% share of U.S. agricultural exports in FY2019 ( Figure 20 ). In contrast, bulk commodity shipments (primarily wheat, rice, feed grains, soybeans, cotton, and unmanufactured tobacco) are forecast at a record low 26.2% share of total U.S. agricultural exports in FY2019 at $35.5 billion. This compares with an average share of over 60% during the 1970s and into the 1980s. As grain and oilseed prices decline, so will the bulk value share of U.S. exports. Farm Asset Values and Debt The U.S. farm income and asset-value situation and outlook suggest a slowly eroding financial situation heading into 2019 for the agriculture sector as a whole. Considerable uncertainty clouds the economic outlook for the sector, reflecting the downward outlook for prices and market conditions, an increasing dependency on international markets to absorb domestic surpluses, and an increasing dependency on federal support to offset lost trade opportunities due to ongoing trade disputes. Farm asset valuesâwhich reflect farm investors' and lenders' expectations about long-term profitability of farm sector investmentsâare projected to be up 2.3% in 2019 to a nominal $3.1 trillion ( Table A-3 ). In inflation-adjusted terms (using 2018 dollars), farm asset values peaked in 2014 ( Figure 21 ). Nominally higher farm asset values are expected in 2019 due to increases in both real estate values (+2.1%) and nonreal-estate values (+3.4%). Real estate is projected to account for 83% of total farm sector asset value. Crop land values are closely linked to commodity prices. The leveling off of crop land values since 2015 reflects stagnant commodity prices ( Figure 22 ). Total farm debt is forecast to rise to a record $415.5 billion in 2019 (+3.4%) ( Table A-3 ). Farm equityâor net worth, defined as asset value minus debtâis projected to be up slightly (+2.2%) at $2.7 trillion in 2019 ( Table A-3 ). The farm debt-to-asset ratio is forecast up in 2019 at 13.4%, the highest level since 2003 but still relatively low by historical standards ( Figure 23 ). If realized, this would be the seventh consecutive year of increase in the debt-to-asset ratio. Average Farm Household Income A farm can have both an on-farm and an off-farm component to its income statement and balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because of the inclusion of nonfarm investments, jobs, and other links to the nonfarm economy. Average farm household income (sum of on- and off-farm income) is projected at $120,082 in 2019 ( Table A-2 ), up 7.0% from 2018 but 10.5% below the record of $134,165 in 2014. About 20% ($24,106) of total farm household income in 2019 is projected to be from farm production activities, and the remaining 80% ($95,976) is earned off the farm (including financial investments). The share of farm income derived from off-farm sources had increased steadily for decades but peaked at about 95% in 2000 ( Figure 24 ). Since 2014, over half of U.S. farm operations have had negative income from their agricultural operations. Total vs. Farm Household Average Income Since the late 1990s, farm household incomes have surged ahead of average U.S. household incomes ( Figure 25 ). In 2018 (the last year for which comparable data were available), the average farm household income of $112,211 was about 25% higher than the average U.S. household income of $90,021 ( Table A-2 ). Appendix. Supporting Charts and Tables Figure A-1 to Figure A-4 present USDA data on monthly farm prices received for several major farm commoditiesâcorn, soybeans, wheat, upland cotton, rice, milk, cattle, hogs, and chickens. The data are presented in an indexed format where monthly price data for year 2010 = 100 to facilitate comparisons. USDA Farm Income Data Tables Table A-1 to Table A-3 present aggregate farm income variables that summarize the financial situation of U.S. agriculture. In addition, Table A-4 presents the annual average farm price received for several major commodities, including the USDA forecast for the 2019-2020 marketing year.


Introduction The U.S. farm sector is vast and varied. It encompasses production activities related to traditional field crops (such as corn, soybeans, wheat, and cotton) and livestock and poultry products (including meat, dairy, and eggs), as well as fruits, tree nuts, and vegetables. In addition, U.S. agricultural output includes greenhouse and nursery products, forest products, custom work, machine hire, and other farm-related activities. The intensity and economic importance of each of these activities, as well as their underlying market structure and production processes, vary regionally based on the agro-climatic setting, market conditions, and other factors. As a result, farm income and rural economic conditions may vary substantially across the United States. Annual U.S. net farm income is the single most-watched indicator of farm sector well-being, as it captures and reflects the entirety of economic activity across the range of production processes, input expenses, and marketing conditions that have prevailed during a specific time period (see box "Measuring Farm Profitability" for a definition of net farm income ). When national net farm income is reported together with a measure of the national farm debt-to-asset ratio, the two summary statistics provide a quick and widely referenced indicator of the economic well-being of the national farm economy. USDA's February 2020 Farm Income Forecast In the first of three official U.S. farm income outlook releases scheduled for 2020 (see box "ERS's Annual Farm Income Forecasts" below), the U.S. Department of Agriculture's (USDA) Economic Research Service (ERS) projects that U.S. net farm income will rise 3.3% year-over-year in 2020 to $96.7 billion, up $3.1 billion from last year ( Figure 1 and Table A-1 ). The February forecast of $96.7 billion is 6.3% above the 10-year average of $89.9 billion (in nominal dollars) but is well below 2013's record high of $123.7 billion. In contrast, net cash income (calculated on a cash-flow basis) is projected lower in 2020 (down 10.8% from 2019) at $109.6 billionâ4.7% below the 10-year average of $115.0 billion. The divergence in year-to-year changes between the two measures of net income is due to their different treatment of harvested crops. Net farm income includes a crop's value after harvest even if it remains in on-farm storage. In contrast, net cash income includes a crop's value only when it is sold. Thus, crops placed in on-farm storage are included in net farm income but not net cash income. In 2018, U.S. farmers harvested a record soybean crop and the third-largest corn crop on record. That same year the U.S.-China trade dispute emerged as an impediment to trade and contributed to a widespread drop in soybean prices. However, the Administration assured producers that the trade dispute was temporary and would soon be resolved in their favor. As a result, many producers of soybeans and other crops held on to their crops in the hopes of capturing higher prices after the trade dispute was resolved. However, by mid-2019 there was no end in sight to the trade dispute, and farmer cash flows necessitated selling from on-farm inventories to meet household and farm operation needs. As a result, the net cash farm income forecast for 2019 included $14.7 billion in sales from on-farm crop inventories, whereas the 2020 forecast includes a much smaller amount ($0.5 billion) in sales from on-farm inventories. This difference accounts for much of the decline in the 2020 net cash farm income projection. Highlights When adjusted for inflation and represented in 2019 dollars ( Figure 2 ), both the net farm income and net cash income for 2019 are projected to be above their average values since 1940 of $88.2 billion and $101 billion, respectively. For historical perspective, both net cash income and net farm income achieved record nominal highs in 2013 but fell to recent lows in 2016 ( Figure 1 ) before trending higher during 2017-2019. Government farm subsidies are projected at $15 billion in 2020âdown nearly 37% from 2019 but still the second-highest since 2006 ( Figure 12 ). In 2019, support from traditional farm programs was bolstered by large direct government payments in response to trade retaliation under the trade dispute with China. Direct government payments of $23.6 billion in 2019 represented 25.2% of net farm incomeâthe largest share since a 27.6% share in 2006. The share of net farm income from government sources in 2020 is projected to decline to 15.5% ( Figure 11 ). Farm asset values and debt levels are projected to reach record levels in 2020âasset values at $3.1 trillion (+1.3% year-over-year) and farm debt at $425.3 billion (+2.3%)âpushing the projected debt-to-asset ratio up to 13.5%, the highest level since 2003 ( Figure 19 ). For the 2019-2020 marketing year for crops and the 2020 calendar year for livestock, USDA forecasts a mixed outlook for major commodity prices: Corn, soybeans, sorghum, oats, rice, hogs, and milk will be up slightly from 2019, while prices for barley, cotton, wheat, choice steers, broilers, and eggs are expected to be lower ( Table A-4 ). Abundant domestic and international supplies of grains and oilseeds contributed to a fifth-straight year of relatively weak commodity prices in 2019 ( Figure A-1 through Figure A-4 , and Table A-4 ). However, the commodity price projections for 2020 are subject to substantial uncertainty associated with as-yet-unknown domestic production and international commodity market developments. Three major factors dominated U.S. agricultural markets during 2019 and have contributed to uncertainty over the supply, demand, and price prospects for most major commodities heading into 2020: surplus stocks, wet weather, and international trade disputes. First, large corn and soybean stocks kept pressure on commodity prices throughout the grain and feed complex in 2019 ( Figure 3 ). Second, adverse weather conditions during the spring planting and fall harvesting periods contributed to market uncertainty regarding the size of the 2019 corn and soybean crops. Third, the U.S.-China trade dispute led to declines in U.S. exports to Chinaâa major market for U.S. agricultural productsâand added to market uncertainty. In particular, the United States was displaced by Brazil as the world's preeminent exporter of soybeans to China. Weather conditions and planting prospects for 2020 are unknown this early in the year. Also, despite the signing of a Phase I trade agreement with China on January 15, 2020, it is unclear how soonâif at allâthe United States may resume normal trade with China or how international demand may evolve heading in 2020. USDA Projects Corn, Soybean, and Wheat Stocks Lower in 2019 Corn and soybeans are the two largest U.S. commercial crops in terms of both value and acreage. For the past several years, U.S. corn and soybean crops have experienced strong growth in both productivity and output, thus helping to build stockpiles at the end of several successive marketing years through the 2018 season. In 2018, U.S. farmers produced a record U.S. soybean harvest of 4.4 billion bushels and record-ending stocks (909 million bushels or a 22.9% stocks-to-use ratio) that year ( Figure 3 ). The record soybean harvest in 2018, combined with the sudden loss of the Chinese soybean market, kept downward pressure on U.S. soybean prices. Despite a smaller crop and lower stocks in 2019, the reduction in volume of U.S. soybean exports to China has prevented a major price recovery. Similarly, several consecutive years of bumper U.S. corn crops have built domestic corn supplies. U.S. corn ending stocks in 2019 are projected down slightly to 1.8 billion bushels after three consecutive years of above 2-billion-bushel ending stock totals. U.S. wheat and cotton supplies are also expected to decline relative to use levels in 2019 but remain high relative to the historical average thus limiting price recovery. Livestock Outlook for 2020 Because the livestock sectors (particularly dairy and cattle but hogs and poultry to a lesser degree) have longer biological lags and often require large capital investments up front, they are slower to adjust to changing market conditions than is the crop sector. As a result, USDA projects livestock and dairy production and prices an extra year into the future (compared with the crop sector) through 2020, and market participants consider this expanded outlook when deciding their market interactions (e.g., buy, sell, expand herd sizes). Background on the U.S. Cattle-Beef Sector During the 2007-2014 period, high feed and forage prices plus widespread drought in the Southern Plainsâthe largest U.S. cattle production regionâresulted in an 8% contraction of the U.S. cattle inventory. Reduced beef supplies led to higher producer and consumer prices and record profitability among cow-calf producers in 2014. This was coupled with a subsequent improvement in forage conditions, all of which helped to trigger the slow rebuilding phase in the cattle cycle that started in 2014 ( Figure 4 ). The expansion continued through 2019 despite weakening profitability, primarily due to the lag in the biological response to the strong market price signals of late 2014. However, the cattle expansion appears to show the first signs of contraction in USDA's January 2020 U.S. cattle inventory report. The estimated cattle and calf population was down slightly from a year earlier at 94.4 million (compared with 94.8 million in January 2019). A factor working against continued expansion in cattle numbers is that producers are now producing more beef with fewer cattle as a result of heavier weights for marketed cattle. Robust Production Growth Projected Across the Livestock Sector Similar to the cattle sector, U.S. hog and poultry flocks have been growing in recent years, but unlike cattle they are expected to continue to expand in 2020. USDA projects production of beef (+1.2%), pork (+4.5%), broilers (+4.3%), and eggs (+1.8%) to expand robustly through 2020. A key uncertainty for the meat-producing sector is whether demand will expand rapidly enough to absorb the continued growth in output or whether surplus production will begin to pressure prices lower. USDA projects that combined domestic and export demand for 2020 will flatten for red meat (+0.0%) but expand for poultry (+3.9%). Livestock-Price-to-Feed-Cost Ratios Signal Lower Profitability Outlook The changing conditions for the U.S. livestock sector may be tracked by the evolution of the ratios of livestock output prices to feed costs ( Figure 5 ). A higher ratio suggests greater profitability for producers. The cattle-, hog-, and broiler-to-feed ratios have all exhibited significant volatility during the 2017-2019 period but in general have trended downward during 2018 and 2019, suggesting eroding profitability. The milk-to-feed price ratio has trended upward since mid-2018 into 2020. This result varies widely across the United States. Many marginally profitable cattle, hog, broiler, and milk producers face continued financial difficulties. Continued strong production growth of between 1% and 5% for red meat and poultry suggests that prices are vulnerable to weakness in demand. USDA projects that the price increase for hogs will slow in 2020, up 2.2% after 4.4% growth in 2019 ( Table A-4 ). Similarly, U.S. milk production is projected to continue growing in 2020 (+1.7%). Despite this production growth, USDA projects U.S. milk prices up slightly in 2020 (+1.3%). Gross Cash Income Highlights Projected farm-sector revenue sources in 2020 include crop revenues (46% of sector revenues), livestock receipts (43%), government payments (3%), and other farm-related income (7%), including crop insurance indemnities, machine hire, and custom work. Total farm sector gross cash income for 2020 is projected down (-0.3%) to $430.9 billion, driven by declines in both direct government payments (-36.6%) and other farm-related income (-8.0%). Cash receipts from crop receipts (+1.0%) and livestock product (+4.6%) are up a combined (+4.6%) ( Figure 6 ). Crop Receipts Total crop sales peaked in 2012 at $231.6 billion when a nationwide drought pushed commodity prices to record or near-record levels. In 2020, crop sales are projected at $198.6 billion, up 1.0% from 2019 ( Figure 7 and Figure 8 ). Projections for 2020 and percentage changes from 2019 include Feed cropsâcorn, barley, oats, sorghum, and hay: $60.1 billion (+2.0%); Oil cropsâsoybeans, peanuts, and other oilseeds: $36.8 billion (-2.3%); Fruits and nuts: $31.0 billion (+6.3%); Vegetables and melons: $20.1 billion (-1.8%); Food grainsâwheat and rice: $11.3 billion (+1.4%); Cotton: $7.1 billion (+2.1%); and Other including tobacco, sugar, greenhouse, and nursery: $31.2 billion (-0.6%). Livestock Receipts The livestock sector includes cattle, hogs, sheep, poultry and eggs, dairy, and other minor activities. Cash receipts for the livestock sector grew steadily from 2009 to 2014, when it peaked at a record $212.3 billion. However, the sector turned downward in 2015 (-10.7%) and again in 2016 (-14.1%), driven largely by projected year-over-year price declines across major livestock categories ( Table A-4 , Figure 9 , and Figure 10 ). In 2017, livestock sector cash receipts recovered with year-to-year growth of 8.1% to $175.6 billion. Cash receipts increased slightly in 2018 (+0.5%) and 2019 (+0.6%). In 2020, cash receipts are projected up strongly (+4.6%) for the sector at $185.8 billion as increased cattle, hogs, and dairy sales offset declines in poultry. Projections for 2020 (and percentage changes from 2019) include Cattle and calf sales: $69.0 billion (+1.6%), Poultry and egg sales: $40.1 billion (+1.7%), Dairy sales: $42.5 billion (+5.2%), Hog sales: $27.1 billion (+18.4%), and Miscellaneous livestock: $7.1 billion (+2.0%). Government Payments Historically, direct government farm program payments have included Direct payments (decoupled payments based on historical planted acres); Price-contingent payments (both coupled and decoupled program outlays linked to market conditions); Conservation payments (including the Conservation Reserve Program and other environmental-based outlays); Ad hoc and emergency disaster assistance payments (including emergency supplemental crop and livestock disaster payments and market loss assistance payments for relief of low commodity prices); and Other miscellaneous outlays, including payments under ad hoc programs initiated by the Administration such as the Market Facilitation Program (MFP) or the cotton ginning cost-share programs but also legislatively authorized programs such as the biomass crop assistance program, peanut quota buyout, milk income loss, tobacco transition, and other miscellaneous programs. Projected government payments of $15.0 billion in 2020, if realized, would represent a 36.6% decline from 2019 but would still be the second-largest since 2006. The $23.6 billion in federal payments in 2019 was the largest taxpayer transfer to the agriculture sector (in absolute dollars) since 2005 ( Figure 12 and Table A-1 ). The surge in federal subsidies in 2019 was driven by large "trade-damage" payments made under the MFP initiated by USDA in response to the U.S.-China trade dispute. MFP payments (reported to be $14.6 billion) in 2019 include outlays from the 2018 MFP program that were not received by producers until 2019, as well as payments under the first and second tranches of the 2019 MFP program. In 2020, MFP payments are projected to decline to $3.7 billion representing the third and final tranche of payments from the 2019 MFP program. No new MFP program has been announced for 2020 by the Administration. USDA permanent disaster assistance is projected higher year-over-year in 2020 at $2.5 billion (+14.2%). Most of the $2.5 billion comes from a new, temporary program, the Wildfire and Hurricane Indemnity Program Plus, enacted through the Disaster Relief Act of 2019 ( P.L. 116-20 ). Payments under the Price Loss Coverage program are projected at $3.9 billion in 2020, up from $1.9 billion in 2019. In contrast, Agricultural Risk Coverage outlays are projected to decline to $39 million, down from $641 million in 2019 (see "Price Contingent" in Figure 12 ). Conservation programs include all conservation programs operated by USDA's Farm Service Agency and the Natural Resources Conservation Service that provide direct payments to producers. Estimated conservation payments of $4.2 billion are forecast for 2020, up (+4.4%) from $4.0 billion in 2019. Total government payments of $15.0 billion represents a 3.5% share of projected gross cash income of $432.2 billion in 2020 ( Figure 6 ). In contrast, government payments are expected to represent 15.5% of the projected net cash income of $109.6 billion ( Figure 11 ). The government share of net farm income reached a peak of 65.2% in 1984 during the height of the farm crisis of the 1980s. The importance of government payments as a percentage of net farm income varies nationally by crop and livestock sector and by region. Dairy Margin Coverage Program Outlook The 2018 farm bill ( P.L. 115-334 ) made several changes to the previous Margin Protection Program (MPP) for dairy, including a new nameâthe Dairy Margin Coverage (DMC) programâand expanded margin coverage choices from the original range of $4.00-$8.00 per hundredweight (cwt.). Under the 2018 farm bill, as a cushion against low milk prices, producers have the option of buying coverage to insure a margin between the national farm price of milk and the cost of feed up to a threshold of $9.50/cwt. on the first 5 million pounds of milk coverage. The DMC margin differs from the USDA-reported milk-to-feed ratio (shown in Figure 5 ) but reflects the same market forces. In August 2019, the formula-based milk-to-feed margin used to determine government payments rose to $9.85/cwt., thus exceeding the newly instituted $9.50/cwt. payment threshold ( Figure 13 ) and decreasing the likelihood of DMC payments in the near future. Since then, the DMC margin continued its rise to $12.21 in November 2019. These increases in the DMC margin decrease the likelihood that DMC payments will be available during the first half of 2020. Despite these price movements, USDA projects that the DMC program will make $637 million in payments in 2020, up from $279 million in 2019. Production Expenses Total production expenses for 2020 for the U.S. agricultural sector are projected to be up by $10.4 billion (+3.0%) from 2019 in nominal dollars at $354.7 billion ( Figure 14 ). Production expenses peaked in both nominal and inflation-adjusted dollars in 2014 then declined for five consecutive years in inflation-adjusted dollars but are projected to turn up again in 2020. Production expenses affect crop and livestock farms differently. The principal expenses for livestock farms are feed costs, purchases of feeder animals and poultry, and hired labor. In contrast, fuel, seed, pesticides, interest, and fertilizer costs are major crop production expenses. USDA projects that all expense categories with the exception of interest rates will be up in 2020 ( Figure 15 ). But how have production expenses moved relative to revenues? A comparison of the indexes of prices paid (an indicator of expenses) versus prices received (an indicator of revenues) reveals that the prices received index generally declined from 2014 through 2016, rebounded in 2017, then trended lower through 2019 ( Figure 16 ). Farm input prices (as reflected by the prices paid index) showed a similar pattern but with a smaller decline from their 2014 peak and have climbed steadily since mid-2016, suggesting that farm sector profit margins have been squeezed since 2016. Farm Asset Values and Debt A measure of the farm sector's financial well-being is net worth as measured by farm assets minus farm debt. A summary statistic that captures this relationship is the debt-to-asset ratio. The U.S. farm income and asset-value situation and outlook suggest a slowly eroding financial situation heading into 2020 for the agriculture sector as a whole. Considerable uncertainty clouds the economic outlook for the sector, reflecting the mixed outlook for prices and market conditions, an increasing dependency on international markets to absorb domestic surpluses, and an increasing dependency on federal support to offset lost trade opportunities due to ongoing trade disputes. Farm asset values (see box "Measuring Farm Wealth: The Debt-to-Asset Ratio" below for details)âwhich reflect farm investors' and lenders' expectations about long-term profitability of farm sector investmentsâare projected to be up 1.3% in 2020 to a nominal $3.1 trillion ( Table A-3 ). The projected rise in asset value is due to increases in both real estate values (+1.5%) and non-real-estate values (+0.6%). Real estate is projected to account for 83% of total farm sector asset value. Inflation-adjusted farm asset values (using 2019 dollars) are projected lower in 2020 (-0.6%). In inflation-adjusted terms, farm asset values peaked in 2014 ( Figure 17 ). Crop land values are closely linked to commodity prices. The leveling off of crop land values since 2015 reflects stagnant commodity prices ( Figure 18 ). Total farm debt is forecast to rise to a record $425.3 billion in 2020 (+2.3%) ( Table A-3 ). Farm equityâor net worth, defined as asset value minus debtâis projected to be up slightly (+1.1%) at $2.7 trillion in 2020 ( Table A-3 ). The farm debt-to-asset ratio is forecast up in 2020 at 13.6%, the highest level since 2003 but still relatively low by historical standards ( Figure 19 ). If realized, this would be the eighth consecutive year of increase in the debt-to-asset ratio. Average Farm Household Income A farm can have both an on-farm and an off-farm component to its income statement and balance sheet of assets and debt. Thus, the well-being of farm operator households is not equivalent to the financial performance of the farm sector or of farm businesses because of the inclusion of nonfarm investments, jobs, and other links to the nonfarm economy. Average farm household income (sum of on- and off-farm income) is projected at $118,908 in 2020 ( Table A-2 ), down 1.5% from 2019 and 11.4% below the record of $134,165 in 2014. About 18% ($20,926) of total farm household income in 2020 is projected to be from farm production activities, while the overwhelming majority, at 82% ($97,982), is earned off the farm (including financial investments). The share of farm income derived from off-farm sources had increased steadily for decades but peaked at about 95% in 2000 ( Figure 20 ). Since 2014, over half of U.S. farm operations have had negative income from their agricultural operations. Total vs. Farm Household Average Income Since the late 1990s, farm household incomes have surged ahead of average U.S. household incomes ( Figure 21 ). In 2018 (the last year for which comparable data were available), the average farm household income of $112,211 was about 25% higher than the average U.S. household income of $90,021 ( Table A-2 ). Appendix. Supporting Charts and Tables Figure A-1 to Figure A-4 present USDA data on monthly farm prices received for several major farm commoditiesâcorn, soybeans, wheat, upland cotton, rice, milk, cattle, hogs, and chickens. The data are presented in an indexed format where monthly price data for year 2010 = 100 to facilitate comparisons. USDA Farm Income Data Tables Table A-1 to Table A-3 present aggregate farm income variables that summarize the financial situation of U.S. agriculture. In addition, Table A-4 presents the annual average farm price received for several major commodities, including the USDA forecast for the 2019-2020 marketing year for major program crops and 2020-2021 for livestock products.