Examining COVID-19 Financial Assistance to Farms and Farm Households

by: Chris Zoller, Extension Educator, ANR

Click here for PDF version of this article

Every individual, family, and business has been impacted by the COVID-19 pandemic.  A national emergency was declared in March 2020 because of the pandemic and the federal government responded by creating financial assistance programs to counter the economic impacts.

The United States Department of Agriculture Economic Research Service (USDA-ERS) released a working paper, Financial Assistance for Farm Operations and Farm Households in the Face of COVID-19.  The study estimates the direct assistance to farms and farm households in 2020.

The USDA-ERS researchers used data from USDA Farm Bill and the Market Facilitation Program (MFP).  Other data sources included the USDA Agricultural Resource Management Survey, U.S. and State-Level Farm Income and Wealth Statistics, Farm Service Agency (FSA), Natural Resources Conservation Service (NRCS), Risk Management Agency (RMA), Small Business Administration (SBA), and the Department of Labor (DOL).

Because of space limitations, only report highlights are presented in this article.  The complete working paper is available here:  https://www.ers.usda.gov/webdocs/publications/101712/ap-090.pdf?v=3375.

In 2020 there was a substantial increase in the amount of government payments to farm operations.  When compared to 2019, the estimated increase is $23.8 billion (see Figure 1).

A total of six economic relief and stimulus bills were passed, with farm operations receiving economic assistance from three in 2020.  These included the Coronavirus Food Assistance Program (CFAP), Paycheck Protection Program (PPP), and the Economic Injury Disaster Loan (EIDL) program.

Coronavirus Food Assistance Programs

There were two Coronavirus Food Assistance Programs (CFAP 1) and (CFAP 2) administered by USDA.  The CFAP programs made direct payments to producers who saw commodity price declines, market disruptions, additional production costs, and reduced prices because of the pandemic.

Combined, the CFAP programs paid $23.7 billion to farmers and ranchers.  The USDA-ERS analysis shows that 49 percent of the $23.7 billion was distributed to livestock and livestock product production and 51 percent to crop production enterprises.

Paycheck Protection Program

Administered by the Small Business Administration (SBA), the PPP was put in place to help farmers and small businesses retain employees and/or rehire furloughed workers.  Analysis shows that $5.9 billion was paid to farm operations.  Publicly available data from the Small Business Administration shows 64 percent ($3.8 billion) was received by crop farmers and 36 percent ($2.1 billion) by livestock producers.

 Economic Injury Disaster Loan and Loan Advance

Farm operations with 500 or less employees were eligible to apply for the Economic Injury Disaster Loan and Loan Advance (EIDL).  These operations could receive up to $150,000 in low-interest non-forgivable loans and up to $10,000 ($1,000 per employee) in forgivable loans.  These loans and advances could be used for fixed costs, payroll, and other bills.

The SBA opened the EIDL applications exclusively for agriculture in May 2020.  While the SBA did not provide industry-specific data about EIDL advances, data from PPP applications indicated farm operations claimed 736,451 agricultural employees.  If we assume all PPP applicants claimed the maximum advance of $1,000 per employee, EIDL advances could have been $736.5 million.  However, this total would not have been in addition to the $5.9 billion under the PPP loans because the amount forgiven through PPP was reduced by the EIDL amount.

Related Assistance Programs

Farm families could have received financial assistance through the Economic Impact Payments (often referred to as stimulus payments) and the Federal Pandemic Unemployment Compensation program.

USDA-ERS researchers made certain assumptions when determining payments made through the Economic Income Payment program and estimated the total disbursed to farm households through this program was $4.3 billion.

Non-COVID-19 Related Financial Assistance

Direct payments were made to some farms in 2020 through existing USDA programs established in the 2018 Farm Bill.  Programs designed to respond to market price changes include Agriculture Risk Coverage (ARC), Price Loss Coverage (PLC), and Market Assistance Loan programs.  Additional assistance programs included Environmental Quality Incentive Program (EQIP) and the Dairy Margin Coverage (DMC) program.  The USDA-ERS researchers also included MFP, Wildlife and Hurricane Indemnity Program (WHIP), and the Federal Crop Insurance Program payments in their analysis.

Total Financial Assistance

The analysis conducted by USDA-ERS estimated that in 2020 a total of $57.7 billion was distributed to farmers and farm households through standing, ad-hoc, and COVID-19 programs.  Researchers estimated that more than 50 percent of the estimated total payments made directly to farmers and farm households came from COVID-19 related programs in 2020.  The CFAP 1 and CFAP 2 programs were the largest, having paid $23.7 billion to farm businesses.

Source:

United States Department of Agriculture Economic Research Service, COVID-19 Working Paper: Financial Assistance for Farm Operations and Farm Households in the Face of COVID-19, July 2021, https://www.ers.usda.gov/webdocs/publications/101712/ap-090.pdf?v=3375

What is the WASDE Report and Why is It Important?

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County

Click here for PDF of this article

The World Agricultural Supply and Demand Estimates (WASDE) report is prepared monthly by the Interagency Commodity Estimates Committees (ICECs) which are chaired by representatives from the Agricultural Marketing Service, Economic Research Service, Farm Service Agency, and Foreign Agricultural Service.  The National Agricultural Statistics Service provides data about U.S. production and each ICEC (one for each of nine commodities) compile and analyze data from U.S. and foreign sources to produce the report.

The WASDE report is prepared under very tight security in a “lock-up” area inside a USDA building.  On the day of the report release, doors in this room are secured, window shades are closed, and telephone and internet communication blocked!  Analysts attending the meeting must present their credentials to a guard before entering to finalize the report.  The WASDE report is released at 12:00 noon Eastern time, and not a minute sooner.

Who Provides Information?

The Interagency Commodity Estimates Committees described earlier use information from a variety of USDA sources.  The National Agricultural Statistics Service provides data related to U.S. crop and livestock production.  The USDA Foreign Agricultural Service, official data from foreign governments, satellite imagery, and weather data are also provided about foreign crop and livestock production and use.

All of this information is reviewed by ICEC members with broad expertise and perspective.  To arrive at a consensus about the forecasts, the committee considers alternate assessments of domestic and foreign supply and use.

Commodity Balance Sheets

Do you remember back to your introductory economics class?  One of the basic principles taught was supply and demand (see graph below).  Those who develop the WASDE report use information to provide the agricultural industry with a baseline for supply and demand of given commodities.  If a large supply is anticipated (think of it as a bumper yield), but domestic or foreign demand is not high, the result is lower prices. On the flip side, a poor harvest (lower quantity) combined with increased demand results in increasing commodity prices.  We have seen commodity markets move up or down within minutes of a WASDE report being released.

A balance sheet for U.S. and world wheat, rice, coarse grains, oilseeds, and cotton is provided.  Coarse grains include corn, barley, sorghum, and oats).  Oilseeds include soybeans, rapeseed, and palm).  The U.S. also reports sugar, meat, poultry, eggs, and milk on the balance sheet.   Separate estimates are provided for components of supply and demand and domestic use is divided into major categories (for example, corn for feed and corn for ethanol use).

Of interest to many is the reported season-average farm price for farm commodities.  Price forecasts are made by experts who carefully analyze the supply and demand sides of the balance sheet, along with commodity models, and in-depth research of domestic and international issues.

Why is the WASDE Important?

Agriculture operates in a global market and supply and demand are constantly changing.  A monthly balance sheet of major commodities provides farmers, industry professionals, and others a current source of information.

Not everyone agrees with every number reported in each WASDE, but everyone should feel confident that a tremendous amount of research and time are invested to provide the most accurate report possible.

Where Can I Read the WASDE Reports?

Current and historical (since 1974) WASDE reports are available here: https://www.usda.gov/oce/commodity/wasde.  These reports are approximately 40 pages in length, but an approximate five-page summary of coarse grains, oilseeds, and cotton is provided at the beginning of the report.  Detailed data tables accompany the report.

Sources:

WASDE FAQs, United States Department of Agriculture, https://www.usda.gov/oce/commodity-markets/wasde/faqs

WASDE Report, United States Department of Agriculture, https://www.usda.gov/oce/commodity/wasde

 

 

The Accuracy and Informativeness of Agricultural Baselines

by: Siddhartha Bora, a Ph.D. student and Ani Katchova, Professor and Farm Income Enhancement Chair, Department of Agricultural, Environmental, and Development Economics, The Ohio State University

United States Department of Agriculture (USDA) and Food and Agricultural Policy Research Institute (FAPRI), University of Missouri are two main sources of baseline projections for US agricultural sector. Published in the beginning of each year, the baselines provide insight about factors influencing the agricultural sector for the next decade. The projections present a conditional scenario based on certain assumptions about macro-economy, weather, and trade, and serve a basis for comparison of alternative policies. In a new study, we evaluate the accuracy and informativeness of USDA and FAPRI baselines since 1997. We find that the predictive content of most variables in the projections diminish after 4-5 years from the current year, and the USDA and FAPRI models do not outperform one another when entire projection path is considered.

The report is available at: https://aede.osu.edu/sites/aede/files/publication_files/AgBaselines2021.pdf

 

 

How Will Your Farm Emerge from the Coronavirus Pandemic?

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County, David Marrison, Extension Educator, ANR, Coshocton County and Mike Estadt, Extension Educator, ANR, Pickaway County

Click here for PDF version of article

It has been more than a year since Coronavirus was declared a pandemic.  Everyone has been touched by the pandemic either directly or indirectly.  As an industry, Agriculture has experienced market disruptions and slowdowns in the processing sector due to the pandemic. In response, the United States government provided billions of dollars in economic relief in 2020 to assist farmers affected by the disruptions. This assistance has continued into 2021 as just recently the United States Department of Agriculture (USDA) announced details about the “Pandemic Assistance for Producers” Initiative.This article takes a look at federal farm support, forecasts for net farm income in 2021, and challenges farm managers to examine how their  business will emerge from the coronavirus pandemic.

US Governmental Farm Support

The following figure from the University of Illinois2  (Figure 3) shares the government farm support programs for the past fifteen years with a forecast for 2021.  Farm program payments have been cyclical and have ranged from a low of approximately $10 billion in 2014 to a high of nearly $45 billion in 2020.  The forecast for government payments in 2021 is around $25 billion.

Farm Income Forecast

The USDA’s Economic Research Service (ERS) 2021 Farm Income Forecast3 projects U.S. net farm income (NFI) to decrease $9.8 billion (8.1%) to $111.4 billion in 2021.  When indexed for inflation, net farm income is anticipated to decrease by $12 billion or 9.7%.  Net farm income is a broad measure of farm sector profitability that incorporates noncash items, including changes in inventories, economic depreciation, and gross credited rental income.  Despite the decline, NFI in 2021 is still expected to be 21 percent higher than the twenty-year average.  ERS predicts U.S. net cash farm income to decrease $10.4 billion (7.5 percent) to $128.3 billion in 2021. Net cash farm income is defined as cash receipts minus cash expenses and does not include changes in inventories or depreciation.

Underlying these forecasts, cash receipts for farm commodities are projected to rise $20.4 billion (5.5%) in 2021. Total animal receipts are expected to increase by $8.6 billion (5.2%) and total crop receipts are forecasted to increase by $11.8 billion (5.8%).  Direct government payments to farmers are expected to be 45.3% lower – a $21 billion decrease from 2020.  This decline is largely caused by lower anticipated payments from supplemental and ad hoc disaster assistance for COVID-19 relief. Total production expenses are forecasted to increase $8.6 billion (2.5%).

 Implications

As the pandemic subsides, it is almost certain that U.S. government farm support payments in 2021 and future years will be significantly lower.  The financial bottom line for many farm operations was positive in 2020 due to historically high ad-hoc payments.  Looking forward to 2021 there is much optimism in the crop sector due to the recent surge in crop prices and lower stock reports.  However, much can happen between now and next fall’s harvest.  It is anticipated that livestock and dairy producers will feel the effects of high grain prices when purchasing feed.

 Post-Pandemic Planning

As we analyze the crazy pandemic year of 2020 and its lingering impacts into this new year, we have been asked how successful farm businesses should plan as the pandemic subsides and life returns to “more normal.”

First, sound business practices and structure are the foundation for business to fall back on when facing internal and external disruptions.  Take time to develop or review your farm’s written Mission Statement, a brief statement that explains why you are in business.  Involve family and employees in the discussion.  It is also recommended to develop written goals – both short-term and long-term. You are more likely to achieve goals that are WRITTEN and shared with others. Post pandemic is also a great time to conduct a SWOT Analysis – to review the Strengths, Weaknesses, Opportunities, and Threats related to your business.  OSU Extension has some great resources to help you in analyzing the foundation of your business.  Check out these resources at:

Secondly, we also offer the following suggestions for you to consider as we move forward from the rollercoaster for 2020 and the early part of 2021:

  1. Do not rely on government farm programs as income sources as you develop enterprise budgets specific to your operation. Check out OSU budgets at: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets
  2. Work toward being a low-cost producer by knowing your cost of production. Higher crop prices can be a temptation not to be detailed in tracking expenses.  Make sure to track and monitor both variable and fixed expenses.
  3. Develop contingency plans and emergency preparedness plans for overcoming disruptions which impact your business. How will work get done if employees get sick or are in quarantine?  How will you overcome future slow-downs in the processing sector or if crops cannot be shipped to market?
  4. Enroll in the Ohio Farm Business Planning and Analysis Program to fully understand your farm operations financial strengths and weaknesses. Learn more here: https://farmprofitability.osu.edu/
  5. Review leases and contracts annually.
  6. Hold family meetings – to discuss finances, review your mission statement, complete a SWOT analysis, and develop goals. See this OSU Extension Fact Sheet: https://ohioline.osu.edu/factsheet/anr-43
  7. Network with your peers. Share successes and challenges.
  8. Form and meet with a farm business advisory team that may include one or more of the following: Extension Educator, accountant, lender, nutritionist, crop advisor, insurance agent, and others important to your business. See this OSU Extension factsheet:  https://ohioline.osu.edu/factsheet/anr-43
  9. Utilize OSU Extension resources – Ohio Ag Manager (https://u.osu.edu/ohioagmanager/), Farm Office (https://farmoffice.osu.edu/), Crop Observation and Recommendation Network (https://agcrops.osu.edu/), Beef Cattle Newsletter (https://u.osu.edu/beefteam/), and Buckeye Dairy Newsletter (https://dairy.osu.edu/).

Summary

The coronavirus pandemic has revealed that agriculture is a resilient industry.  Crops were still planted and harvested;  livestock continued to be cared for.  Despite some infrastructure issues related to food processing, Americans were still able to access safe and affordable food.  The pandemic has revealed how dependent the agricultural supply chain is on timely delivery of goods and services, healthy and available agricultural workers, and a confident consumer willing to adapt and adopt new buying practices.

As Americans begin to exit the last throes of the pandemic’s lockdowns, return to work and school, and begin life anew, reflection on emergency preparedness should be re-evaluated and adjusted plans put in place.  Each farm business should continue to put contingency plans in place for the next disruption. And, make sure you keep an adequate supply of toilet paper on hand, just in case!

References

1USDA Pandemic Assistance for Producers. Accessed from: https://www.farmers.gov

2Good, Keith. USDA Announces “Pandemic Assistance for Producers”, New CFAP Aid.  March 25, 2021. https://farmpolicynews.illinois.edu/2021/03/usda-announces-pandemic-assistance-for-producers-new-cfap-aid/

32021 Farm Sector Income Forecast. Accessed from: https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-sector-income-forecast/

 

 

 

 

Farm Office Live to Analyze USDA’s Pandemic Assistance for Producers Initiative

By Barry Ward, David Marrison, Peggy Hall, Dianne Shoemaker and Julie Strawser – Ohio State University Extension

April’s “Farm Office Live” will focus on details of the USDA’s Pandemic Assistance for Producers” initiative announced on March 24, 2021. Changes were made in effort to reach a greater share of farming operations and improve USDA pandemic assistance.

During the webinar, we will be sharing details about the pandemic initiative and discussing some of the changes made to the Coronavirus Food Assistance Program (CFAP).  Our Farm Office Team will also provide a legislative update and discuss changes to the Paycheck Protection Program and Employee Retention Credits. They will also be on hand to answer your questions and address any related issues.

Two live sessions will be offered on Wednesday, April 7, from 7:00 – 8:30 p.m. and again on Friday, April 9, from 10:00 – 11:30 a.m. A replay will be available on the Farm Office website if you cannot attend the live event.

Farm Office Live is a webinar series addressing the latest outlook and updates on ag law, farm management, ag economics, farm business analysis and other related issues. It is presented by the faculty and educators with the College of Food, Agricultural and Environmental Sciences at The Ohio State University.

To register or view past recordings, visit https://go.osu.edu/farmofficelive.

For more information or to submit a topic for discussion, email Julie Strawser at strawser.35@osu.edu or call the Farm Office at 614-292-2433.

USDA Announces Pandemic Assistance to Farmers

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County

Source of Information: https://www.farmers.gov/

The United States Department of Agriculture (USDA) announced this week it is establishing new programs and efforts to provide financial assistance to farmers negatively impacted by the Coronavirus pandemic.

The new program is called the USDA Pandemic Assistance for Producers and is intended to reach a broader representation of producers than previous COVID-19 aid programs.  The program will place a greater emphasis on small and socially disadvantaged producers, specialty crop and organic producers, timber harvesting, as well as support for the food supply chain and producers of renewable fuels.

The USDA Pandemic Assistance for Producers program administered by the Farm Service Agency (FSA) includes four parts.  Details below were provided in a news release from USDA.

Part 1:

USDA will dedicate at least $6 billion to develop a number of new programs or modify existing proposals using discretionary funding from the Consolidated Appropriations Act and other coronavirus funding that went unspent by the previous administration. Where rulemaking is required, it will commence this spring. These efforts will include assistance for:

  • Dairy farmers through the Dairy Donation Program or other means:
  • Euthanized livestock and poultry;
  • Biofuels;
  • Specialty crops, beginning farmers, local, urban and organic farms;
  • Costs for organic certification or to continue or add conservation activities
  • Other possible expansion and corrections to CFAP that were not part of today’s announcement such as to support dairy or other livestock producers;
  • Timber harvesting and hauling;
  • Personal Protective Equipment (PPE) and other protective measures for food and farm workers and specialty crop and seafood producers, processors and distributors;
  • Improving the resilience of the food supply chain, including assistance to meat and poultry operations to facilitate interstate shipment;
  • Developing infrastructure to support donation and distribution of perishable commodities, including food donation and distribution through farm-to-school, restaurants or other community organizations; and
  • Reducing food waste.

Part 2:

USDA expects to begin investing approximately $500 million in expedited assistance through several existing programs this spring, with most by April 30. This new assistance includes:

  • $100 million in additional funding for the Specialty Crop Block Grant Program, administered by the Agricultural Marketing Service (AMS), which enhances the competitiveness of fruits, vegetables, tree nuts, dried fruits, horticulture, and nursery crops.
  • $75 million in additional funding for the Farmers Opportunities Training and Outreach program, administered by the National Institute of Food and Agriculture (NIFA) and the Office of Partnerships and Public Engagement, which encourages and assists socially disadvantaged, veteran, and beginning farmers and ranchers in the ownership and operation of farms and ranches.
  • $100 million in additional funding for the Local Agricultural Marketing Program, administered by the AMS and Rural Development, which supports the development, coordination and expansion of direct producer-to-consumer marketing, local and regional food markets and enterprises and value-added agricultural products.
  • $75 million in additional funding for the Gus Schumacher Nutrition Incentive Program, administered by the NIFA, which provides funding opportunities to conduct and evaluate projects providing incentives to increase the purchase of fruits and vegetables by low-income consumers
  • $20 million for the Animal and Plant Health Inspection Service to improve and maintain animal disease prevention and response capacity, including the National Animal Health Laboratory Network.
  • $20 million for the Agricultural Research Service to work collaboratively with Texas A&M on the critical intersection between responsive agriculture, food production, and human nutrition and health.
  • $28 million for NIFA to provide grants to state departments of agriculture to expand or sustain existing farm stress assistance programs.
  • Approximately $80 million in additional payments to domestic users of upland and extra-long staple cotton based on a formula set in the Consolidated Appropriations Act, 2021 that USDA plans to deliver through the Economic Adjustment Assistance for Textile Mills program.

Part 3:

The Consolidated Appropriations Act, 2021, enacted December 2020 requires FSA to make certain payments to producers according to a mandated formula. USDA is now expediting these provisions because there is no discretion involved in interpreting such directives, they are self-enacting.

  • An increase in CFAP 1 payment rates for cattle. Cattle producers with approved CFAP 1 applications will automatically receive these payments beginning in April. Information on the additional payment rates for cattle can be found on farmers.gov/cfap. Eligible producers do not need to submit new applications, since payments are based on previously approved CFAP 1 applications. USDA estimates additional payments of more than $1.1 billion to more than 410,000 producers, according to the mandated formula.
  • Additional CFAP assistance of $20 per acre for producers of eligible crops identified as CFAP 2 flat-rate or price-trigger crops beginning in April. This includes alfalfa, corn, cotton, hemp, peanuts, rice, sorghum, soybeans, sugar beets and wheat, among other crops. FSA will automatically issue payments to eligible price trigger and flat-rate crop producers based on the eligible acres included on their CFAP 2 applications. Eligible producers do not need to submit a new CFAP 2 application. For a list of all eligible row-crops, visit farmers.gov/cfap. USDA estimates additional payments of more than $4.5 billion to more than 560,000 producers, according to the mandated formula.
  • USDA will finalize routine decisions and minor formula adjustments on applications and begin processing payments for certain applications filed as part of the CFAP Additional Assistance program in the following categories:
    • Applications filed for pullets and turfgrass sod;
    • A formula correction for row-crop producer applications to allow producers with a non-Actual Production History (APH) insurance policy to use 100% of the 2019 Agriculture Risk Coverage-County Option (ARC-CO) benchmark yield in the calculation;
    • Sales commodity applications revised to include insurance indemnities, Noninsured Crop Disaster Assistance Program payments, and Wildfire and Hurricane Indemnity Program Plus payments, as required by statute; and
    • Additional payments for swine producers and contract growers under CFAP Additional Assistance remain on hold and are likely to require modifications to the regulation as part of the broader evaluation and future assistance; however, FSA will continue to accept applications from interested producers.

Part 4:

USDA will re-open sign-up for of CFAP 2 for at least 60 days beginning on April 5, 2021.

  • FSA has committed at least $2.5 million to establish partnerships and direct outreach efforts intended to improve outreach for CFAP 2 and will cooperate with grassroots organizations with strong connections to socially disadvantaged communities to ensure they are informed and aware of the application process.

Summary

Applications for this program will open on April 5th.  Anyone interested in additional information about the USDA Pandemic Assistance to Producers program is encouraged to see https://www.farmers.gov/pandemic-assistance/cfap or their local FSA office.

The Status and Changing Face of Ohio Agriculture

by: Ani Katchova, Associate Professor and Farm Income Enhancement Chair, Department of Agricultural, Environmental, and Development Economics, The Ohio State University

Farmers deal with many stressors, most of which are out of their control: extreme weather, market changes, COVID-19, trade wars, fluctuating market prices, and environmental challenges. In 2019 particularly, a harsh winter followed by high spring and early summer rainfall led to damaged hay fields, delays in the planting of corn and soybean crops, and an inability to harvest early season crops in a timely manner. Tariffs on exported farm products led to declines in soybean and corn prices and contributed to uncertainty about the long-term security of global trade relationships. Growing attention to harmful algal blooms and other water quality challenges has increased pressure on farmers to reduce nutrient runoff from farm fields. Is this an unprecedented time in history, or have farmers experienced similar levels of stress in the past? It’s helpful to place current events in the context of long-term trends. Researchers from the College of Food, Agricultural, and Environmental Sciences explored 20 years of data from the U.S. Census of Agriculture and multiple public sources to understand long-term trends in Ohio. Here’s what they discovered.

https://aede.osu.edu/sites/aede/files/publication_files/AgCensus_Ebook_V5.pdf

 

Farm Office Live Continues!

by: Barry Ward, David Marrison, Peggy Hall, Dianne Shoemaker – Ohio State University Extension

“Farm Office Live” continues this winter as an opportunity for you to get the latest outlook and updates on ag law, farm management, ag economics, farm business analysis and other related issues from faculty and educators with the College of Food, Agricultural and Environmental Sciences at The Ohio State University.

Each Farm Office Live begins with presentations on select ag law and farm management topics from our specialists followed by open discussions and a Q&A session. Viewers can attend “Farm Office Live” online each month on Wednesday evening or Friday morning, or can catch a recording of each program.

The full slate of offerings remaining for this winter are:

  • March 10th 7:00 – 8:30 pm
  • March 12th 10:00 – 11:30 am
  • April 7th 7:00 – 8:30 pm
  • April 9th 10:00 – 11:30 am

Topics to be addressed in March include:

  • Coronavirus Food Assistance Program (CFAP)
  • Proposed Stimulus Legislation
  • General Legislative Update
  • Ohio Farm Business Analysis – A Look at Crops
  • Crop Budget & Rental Rates

To register or view past recordings, visit https://go.osu.edu/farmofficelive

For more information or to submit a topic for discussion, email Julie Strawser at strawser.35@osu.edu or call the farm office at 614-292-2433. We look forward to you joining us!

USDA Agricultural Projections to 2030

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County

Click here for PDF version–easier to view Figures

The United States Department of Agriculture (USDA) recently released the interagency report: USDA Agricultural Projections to 2030.  These long-term projections include several assumptions related to the Farm Bill, macroeconomic conditions, farm policy, and trade agreements.  While long-term projections are based on assumptions and many unknowns, they do provide a glimpse of how U.S. farm commodity prices may perform over the next several years.  Anyone interested in reading specific details is encouraged to see the report available here: https://www.ers.usda.gov/webdocs/outlooks/100526/oce-2021-1.pdf?v=3513.2.

This article briefly summarizes selected selections of the 102-page report, including U.S. crop prices, milk production, U.S. farm income, and government payments.  Figures from the report are included to accompany the text.

U.S. Crop Prices

Rising global demand for diversified diets and protein will continue to stimulate import demand for grains. Increased demand for these crops is accompanied by rising competition for market share from countries such as Brazil, Argentina, the EU, and the Black Sea region. The United States also faces challenges related to ongoing tensions with trade partners and a relatively strong U.S. dollar. Although strong trade competition continues, U.S. commodities remain generally competitive in global agricultural markets, with U.S. corn and soybean exports projected at record highs by 2030/31. Nominal prices for wheat, cotton, and rice are expected to rise modestly between 2021/22 and 2030/31.

 

Milk Production

Milk production is projected to rise at a compound annual growth rate of 1.1 percent over the next 10 years, reaching 248 billion pounds in 2030. With slow growth in domestic demand as the economy recovers from the pandemic, the dairy herd will remain relatively flat in the middle of the decade but grow in the latter years. In 2030, milk cows are projected to number 9.43 million head. Economies of scale trends are expected to continue, leading to further farm consolidation. Technological and genetic developments will contribute to increasing yields. In 2030, milk production per cow is projected to average 26,295 pounds.

  • Commercial use of dairy products is expected to rise faster than the growth in the U.S. population over the next decade.
  • Global demand for U.S. dairy products is expected to continue to grow over the next 10 years, with the largest increases being in exports of products with high skim-solids content such as dry skim milk products (nonfat dry milk and skim milk powder), whey products, and lactose.
  • The all-milk price in 2021 is expected to be lower than 2020 as milk production increases significantly. Feed prices are expected to increase from 2020 to 2021. Milk production in 2022 is projected to grow at a rate slower than in 2020 and 2021 because of lagged supply response to relatively low milk prices and relatively high feed prices in 2021. With slow milk production growth in 2022 and an increase in demand as the economy is recovering from the pandemic, the all-milk price is projected to increase in 2022. As the industry adjusts, the all milk price dips to lower levels in 2023-25. The all milk price then increases in nominal terms later in the decade.

 

U.S. Farm Income

Net farm income and net cash income are projected to decrease in 2021. Net farm income is projected to decrease $19.5 billion in 2020 to $100.1 billion in 2021. Net cash farm income is projected to decrease 16.7 percent in 2020 to $111.7 billion for 2021. The projected decline in net farm income for 2021 is primarily because of lower government payments relative to 2020. Farmers received an estimated $24.3 billion in direct payments from the Coronavirus Food Assistance Programs 1 and 2 during 2020. The 2021 farm income value does not include payments made under the Consolidated Appropriations Act 2021 that was passed after the projections were tabulated.

Government Payments

After falling $35 billion in 2021 to $11.5 billion, direct government payments are projected to decline again in 2022 as market prices are expected to improve and ad hoc payment programs expire. Government payments are then expected to climb before decreasing after 2024 through 2030. The Conservation Reserve Program (CRP), ARC and PLC payments collectively account for the largest share of direct government payments to the agricultural sector over 2021-30. These projections also assume no government payments from potential new farm sector programs.

 

Moving Forward

Again, many things can/will happen between now and 2030 to alter these projections.  However, they are one source of information to use for long-term planning.  Based on these projected production levels and prices, will you be competitive in the long-term?  If not, what changes are necessary to make you successful?  If so, what can you do to be even more successful?  I encourage you to talk to your Extension Educator and other advisors as you complete farm business planning.

Crop Insurance and Farm Bill Decision

By: Chris Bruynis, Extension Educator, OSU Extension

Crop Insurance and Farm Bill Decision

The 2021 decision for making the crop insurance and farm bill decisions is all about risk management. With the recent increased crop prices and the volatility in the markets, crop insurance is expected to increase by about 50%-60% this year compared to last year. So, with crop insurance more expensive and the choice between Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) unclear, the strategy to protect risk exposure becomes more interesting. In this article different strategies are outlined looking at ARC/PLC with Revenue Protection (RP), Supplemental Crop Option (SCO) and Enhanced Coverage Option (ECO).

To illustrate the different decisions several corn scenarios from an example farm in Clermont County Ohio will be used for this article. Here is some background information pertinent to the examples.

  • Revenue Protection pays against the actual farm revenue using either the December futures for the month of February or the higher of the spring price or the harvest price depending on the product selected. If you believe the spring price is the higher of the two, then some insurance premiums could be saved by not electing the harvest price. Levels of RP range from 50% to 85% in 5% increments. RP can be paired with any of the Farm Bill programs. To read more on RP go to https://www.extension.iastate.edu/agdm/crops/html/a1-54.html
  • Supplemental Crop Insurance coverage starts at the level of RP and covers up to 86% of the revenue. SCO can provide additional protection above their individual policy at a cheaper premium rate. SCO does not protect against the actual farm revenue but instead uses a county yield times the spring/harvest price. So, if your farm’s production history is significantly different than the county yield, this might not be the correct product for your farm. SCO can only be used with the PLC program.
  • Enhanced Coverage Option covers county revenue like SCO but starts at 86% and can go to either 90% or 95%. ECO can be paired with any of the Farm Bill programs. To read more on SCO/ECO go to https://www.extension.iastate.edu/agdm/crops/html/a1-44.html
  • Agricultural Risk Coverage-County makes a payment when the market year average (MYA) price times the county yield falls below the county guarantee, which is calculated at 86% of the 5-year Olympic Average of prices and yields. Unlike RP, which uses growing season prices, MYA are the prices received for crops between the start of harvest this year until the start of harvest next year. Also, unlike RP, ARC-CO payments are paid against 85% of the base acres, not planted acres.
  • Price Loss Coverage pays when the MYA price falls below the reference price. For corn this price is $3.70 per bushel. PLC payments are based on base yields, which typically are 25% to 35% lower than actual yields for most farms, times 85% of the base acres, which may not reflect actual acres planted.

Before deciding about crop insurance or farm bill elections, think about your farm’s production history. Is it relatively consistent from year to year or is it highly variable? Does it yield similar to the county or is it significantly different? Are you growing crops that mirror the base acres on this farm, so the Farm Bill payments track with your risk exposure? It is also important to think about what risk you are comfortable assuming. If you can survive with less insurance in the event of a low revenue year, although not pleasant, do you want to “self-insure” to a greater level.

A. This sample farm has an APH corn yield of 203 bu/A. The county’s five year average is 180 bu/A and trend with each other accordingly. Preliminary estimates have the spring crop insurance price at $4.48 and at the 85% coverage level the coverage per acre would be $773 and cost $51 per acre. Fall prices will not be discussed for example simplicity.

B. What happens to coverage if 50% RP is selected and then SCO is added for this farm? The RP coverage per acre, which is based on actual farm production, becomes $454 and the SCO based on county revenue, would increase the coverage to $696. The cost for this option becomes $24 per acre.

C. A third scenario is to purchase RP for 75% and then ECO for 95% leaving a coverage gap between 75% to 86% but still having 84% coverage level. Under this example RP coverage would be $682 per acre based on actual farm revenue and then ECO would add an additional $82 per acre based on county revenue.  The cost of this combination is $17 for RP plus $29 for ECO for a total of $46 per acre.

Let’s examine how these three scenarios would perform under different revenue examples. The amount displayed is the net from the transaction (estimated payments less estimated costs).

 

Scenario A

85% RP

Scenario B

50% RP

86% SCO

Scenario C

75% RP

95% ECO

Farm Yield 200 bu/a

County Yield 180 bu/a

Harvest Price $4.00

-$51.00 -$24.00 $3.00
Farm Yield 150 bu/a

County Yield 180 bu/a

Harvest Price $4.00

$122.00

-$24.00 $85.00
Farm Yield 180 bu/a

County Yield 135 bu/a

Harvest Price $4.00

$2.00 $132.00 $27.00
Farm Yield 220 bu/a

County Yield 200 bu/a

Harvest Price $3.50

-$51.00 -$24.00 $27.00

Farm Yield 100 bu/a

County Yield 90 bu/a

Harvest Price $5.50

$348.00 $339.00

$330.00

 

A few conclusions can be drawn from examination of these three scenarios with different yield and price assumptions. First, ECO will make payments on smaller losses since it starts after a 5% county revenue loss. It is limited and will max out at $4.00 corn with a payment of $73.00 per acre.

Secondly there are potential differences between RP and SCO/ECO if a farm yields significantly differently than the county yields since these programs protect against county-based losses. Under certain situations, like a widespread drought event, all the combinations provide similar risk protection.

Continuing the example to include possible outcomes under the ARC/PLC election for this same example farm provides insight to another risk management decision that needs to be made. Using the same yield and prices, the following chart contains potential farm bill payments. Note that if electing SCO insurance, ARC-CO is not available on those farms.

 

Scenario A Scenario B Scenario C
Farm Yield 200 bu/a

County Yield 180 bu/a

Harvest Price $4.00

PLC – $0.00          ARC-CO – $0.00 PLC – $0.00         ARC-CO – N/A PLC – $0.00          ARC-CO – $0.00
Farm Yield 150 bu/a

County Yield 180 bu/a

Harvest Price $4.00

PLC – $0.00       ARC-CO – $0.00 PLC – $0.00           ARC-CO – N/A PLC – $0.00       ARC-CO – $0.00
Farm Yield 180 bu/a

County Yield 135 bu/a

Harvest Price $4.00

PLC – $0.00      ARC-CO – $0.00 PLC – $0.00          ARC-CO – N/A PLC – $0.00      ARC-CO – $0.00
Farm Yield 220 bu/a

County Yield 200 bu/a

Harvest Price $3.50

PLC – $26.00    ARC-CO – $0.00 PLC – $26.00         ARC-CO – N/A PLC – $26.00    ARC-CO – $0.00
Farm Yield 100 bu/a

County Yield 90 bu/a

Harvest Price $5.50

PLC – $0.00         ARC-CO – $73.00 PLC – $0.00         ARC-CO – N/A

PLC – $0.00         ARC-CO – $73.00

Unless there are unexpected low prices or low revenue, these programs provide very little cash flow relative to crop insurance. Also, these payments are not on planted acres or farm/county yields but are on base acres and base yields.  Additionally, the price is based on the MYA price and not the higher of the spring or harvest price.  The real questions are “How much risk can you afford to assume?” and “Do I use SCO with PLC to reduce crop insurance costs exposing the farm to additional risk if it yields significantly less than the county average?”