Farm Bankruptcies Update: Fourth Quarter of 2020

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

The number of Chapter 12 bankruptcy filings has not increased in the fourth quarter of 2020 nor in all quarters of 2020 as many had been initially concerned at the beginning of the pandemic. The U.S. farm economy has been supported by strong government payments which reached $46.3 billion in 2020, the largest amount in history. Combined with strong farmland values and low interest rates, the farm bankruptcy rate in Ohio rather decreased in 2020, with 1.29 farm bankruptcies per 10,000 farms.

The report is available at:

https://aede.osu.edu/sites/aede/files/publication_files/BankruptcyUpdate2020Q4.pdf

 

Ohio Local Bank Market Conditions

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

The US banking sector and local community banks faced great uncertainty in 2020 due to the pandemic. The consolidation intensity within US banking sector continued in 2020. Ohio experienced a similar trend, with continued decrease in the number of community banks. However, Ohio banks remained highly profitable relative to the national average, and the credit availability increased significantly as the increase in the amount of bank deposits outpaced the increase in the amount of loans. Overall Ohio banks slightly increased bankruptcy risks in 2020 but are still more resilient than the national average.

The full report is available at:

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

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.

Expect Farm Liquidity to Decline in 2021

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

Liquidity is the ability of a farm business to quickly convert current assets to cash to pay short-term (less than 12 months) cash obligations, debt, family living, and taxes. It is one of several measures used to gauge farm financial performance over time. The United States Department of Agriculture Economic Research Service (USDA-ERS) is forecasting a decline in farm sector liquidity in 2021.  This article will discuss working capital, current ratio, and times interest earned ratio financial measures.

Working Capital

Working capital is calculated by subtracting current liabilities from current assets.  Let’s assume a farm has $300,000 in current assets and $175,000 in current liabilities.  This farm has $25,000 ($300,000 – $175,000) in working capital.   There is no standard dollar amount of working capital needed for businesses as it will vary by farm size.   Comparing total working capital to gross revenues does provide an indicator of whether a farm’s working capital is “enough”.  USDA-ERS forecasts a 13.6% decline in working capital in 2021 from 2020. If realized, this would be the largest decline since 2016.

See the table below to see how your farm compares.

Working Capital to Gross Revenue Ranges

>30% Strong
10% to 30% Caution
<10% Vulnerable

(Source: University of Minnesota Extension  https://extension.umn.edu/farm-finance/ratios-and-measurements)

Current Ratio

The current ratio is sometimes used when discussing liquidity.  The current ratio is determined by dividing current assets by current liabilities.  Using the example above, this farm has a current ratio of 1.7 ($300,000/$175,000).  In this example, for every $1 of current debt (liabilities), there is $1.70 of current assets available to cover it.  Using the benchmark chart below, this farm falls into the “caution” category.

 Current Ratio Ranges

Greater than 2.0 Strong
1.3 to 2.0 Caution
Less than 1.3 Vulnerable

(Source: University of Minnesota Extension https://extension.umn.edu/farm-finance/ratios-and-measurements)

Times Interest Earned Ratio

The times interest earned ratio is a less commonly known measure used to gauge the ability to service the interest portion of debt out of net farm income. Typically, interest is a cash expense and the principal portion of debt is paid out of net farm income. The times interest earned ratio is calculated as net farm income, less interest expense, divided by interest expense. A value less than 1 indicates that there is not enough cash coming from farm operations to make interest payments. Without a cash inflow from outside the farm, the ability to make interest payments would require borrowing or selling assets. It also indicates that the farm business is not generating sufficient dollars to make scheduled principal payments.  A higher times interest earned ratio indicates greater ease in making interest payments. USDA-ERS forecasts the times interest earned ratio will decrease from 9.2 in 2020 to 8.4 in 2021. Still, the times interest earned ratio is forecasted to remain above 2014-19 levels.

Summary

It is important to remember that examining only one measure can give a skewed, incomplete picture of farm financial performance.  An in-depth analysis of income, expenses, assets, liabilities, and cash flow is needed to provide a comprehensive understanding of financial performance.

I encourage you to schedule a meeting with your lender or Extension Educator to review your balance sheet, crunch some numbers, and discuss any questions as you develop a plan.  Whole farm analysis through the Ohio Farm Business Analysis program will also generate these critical financial numbers for your farm as well as benchmark reports with industry comparisons.  Additional information is available here: https://farmprofitability.osu.edu.

 

Sources:

Farm Sector Liquidity Forecast to Decline in 2021, United States Department of Agriculture – Economic Research Service, https://www.ers.usda.gov/amber-waves/2021/march/farm-sector-liquidity-forecast-to-decline-in-2021/

Ratios and Measurements in Farm Income, University of Minnesota, https://extension.umn.edu/farm-finance/ratios-and-measurements#liquidity-796060

The Basics of a Farm Balance Sheet, Ohio State University Extension, https://ohioline.osu.edu/factsheet/anr-64

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!

Communication Infrastructure Leasing and Purchase Agreements

by: Mike Estadt, OSU Extension Educator in Pickaway County and Jeffrey Lewis, Research Specialist, OSU Ag and Resource Law Program

The coronavirus pandemic has revealed to rural Ohioans that broadband internet is no longer a luxury but a requirement for work, school, and daily activities.  Recent legislation in the Ohio House of Representatives and policy from many organizations and governmental agencies are calling for the buildout of communications infrastructure to address the discrepancies in broadband technology.

One of the proposed alternatives is increased 5G cellular network coverage. Many current cell towers will be converted, but additional towers may be required to increase the range of this high-speed wireless technology. Landowners in deficient areas may receive inquiries into the purchase of or rental of a parcel of land to construct a tower on.  The questions of how much is my land worth and should I sell it or lease the property will arise.

The benefit to SELLING the tower site is your ability to get all your money now, instead of later. Think of the lottery.  Most people take the cash option because they can get a better return with other investments than they can with the lottery’s annuity payment. It is the expectation of an improved future Return on Investment (ROI) that motivates them more than the ROI itself, which often does not materialize. If the time value of money is a motivation, a conversation with a financial advisor is advised because the flip side is you could be selling something now that could provide you with a more profound benefit later.

The biggest advantages to LEASING the cell tower site is your long-term stability of income and the ability to negotiate lease terms.  Leases will vary upon length and terms.  As the final renewal term comes close to expiration the tenant might be very motivated to negotiate newer terms. It generally will be financially advantageous to keep the same site, since vacating the site would require the cell tower company to remove the tower and remediate the site to its original condition, then buy/lease a new site and install a new tower at the new site.

The downside to leasing the tower site is the site remains a part of the parent tract. If the fee owner of the parent tract tries to get a loan against the property, the tower site could affect the type of financing available. Residential lenders might have concerns with blended-use properties. One might consider subdividing the tower site from the parent tract to mitigate this issue.

General considerations of a cell tower lease include:

  • Value. The lease amounts will always depend upon various factors. The dollar amount will depend on the type of tower, location, and availability of other sites. Some sites may fetch rates of a thousand dollars per year, while others can garner six figures.
  • Legal Description and Access. The lease needs to include a detailed legal description that specifically identifies the tower site and the means of access. Will you be granting the network company an easement to access the tower site? Or is the network company dropping the tower in the back yard next to your pool and using your driveway? If so, you may be damaging the value of your house.
  • Maintenance and Taxes. Who maintains the access driveway, takes care of noxious weeds and pays the real estate taxes? Will your property taxes increase? Will your insurance premium increase? Contact your insurance provider to determine if you may need to increase your liability insurance. Make sure increased operating expenses are either factored into the rent or you can work an expense pass-through into the lease.
  • Duration, renewal options, and escalation clauses:
    • Usually, long-term. Initial term may be as short as 5 years or as long as 15.
    • Renewal terms could be anywhere from 1-10 years in duration. Some leases may contain a series of renewal options that could total the term of 30 years if all renewal options are exercised.
    • Escalation clauses sometimes activate with each renewal. An escalation allows the landowner to increase the rental rate according to a pre-agreed timeline. This escalation could be a negotiated as a percentage every year or an adjustment every 5 years according to Consumer Price Index.
    • If the lessor chooses not to renew the lease, make sure the lease clearly states who is responsible for the removal of the tower and remediation of the property back to its original state.

It goes to say that before entering into any type of lease or purchase agreement, have an attorney review the documents.

 

 

 

 

Corn, Soybean and Wheat Enterprise Budgets – Projected Returns for 2021 Increasing Fertilizer Prices May Force Tough Decisions

by: Barry Ward, Leader, Production Business Management & John Barker, Extension Educator, Agriculture & Amos Innovative Program, Knox County.  College of Food, Agricultural and Environmental Sciences & Ohio State University Extension

The profit margin outlook for corn, soybeans and wheat is relatively positive as planting season approaches. Prices of all three of our main commodity crops have moved higher since last summer and forward prices for this fall are currently at levels high enough to project positive returns for 2021 crop production. Recent increases in fertilizer prices have negatively affected projected returns. Higher crop insurance costs as well as moderately higher energy costs relative to last year will also add to overall costs for 2021.

Production costs for Ohio field crops are forecast to be modestly higher compared to last year with higher fertilizer, fuel and crop insurance expenses. Variable costs for corn in Ohio for 2021 are projected to range from $386 to $470 per acre depending on land productivity. Variable costs for 2021 Ohio soybeans are projected to range from $216 to $242 per acre. Wheat variable expenses for 2021 are projected to range from $166 to $198 per acre.

Returns (excluding government payments) will likely be higher for many producers depending on price movement throughout the rest of the growing year. Grain prices currently used as assumptions in the 2021 crop enterprise budgets are $4.30/bushel for corn, $11.55/bushel for soybeans and $6.25/bushel for wheat. Projected returns above variable costs (contribution margin) range from $216 to $434 per acre for corn and $284 to $509 per acre for soybeans. Projected returns above variable costs for wheat range from $193 to $342 per acre. As a reminder, fixed costs (overhead) must be paid from these returns above variable costs. Fixed costs include machinery ownership costs, land costs including rent and payment for owner operator labor and management including other unpaid family labor.

Fertilizer prices continue to increase.  If you have not checked fertilizer prices lately, be prepared for some sticker shock. Producers with some fertilizer purchased and stored or pre-priced prior to recent price increases will likely see a healthier bottom line this upcoming crop year.

Those with little or no fertilizer pre-purchased and stored or pre-priced may want to consider using P and K buildup to furnish crop needs this year in anticipation of possibly lower prices in the future.  Now may be a good time review your fertilizer plans as you are considering how to best utilize your financial resources in 2021.

Use realistic yield goals.  Yield goals vary by field.  Each field has unique characteristics that can impact yield.

Utilize crop removal rates to determine crop nutrient needs.  Crop removal rates can be found in the new Tri-State Fertilizer Recommendations for Corn, Soybeans, Wheat, and Alfalfa (Tables 15 and 16), available at your local Extension Office.

Start with a recent soil test.  If your soil test levels are in the maintenance range or higher, 2021 may be a good year to “borrow” from your soil nutrient bank.

As an example, a 150-bushel corn crop will remove about 55 pounds of P2O5 per acre in the harvested grain.  This would result in a reduction in the soil test level of approximately 3 ppm.

Current budget analyses indicates favorable returns for soybeans compared to corn but crop price change and harvest yields may change this outcome. These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2021 have been completed and posted to the Farm Office website: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets

 

 

 

 

 

 

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.