Higher crop prices and coronavirus aid boost farm income
Farm income recovered this summer from the steep coronavirus-driven declines of last spring, according to ag bankers in the Plains and Midwest who took part in Federal Reserve surveys. “An influx of government payments and higher prices for agricultural commodities provided greater support for farm finances in the third quarter and seemed to limit demand for financing,” said a summary by two Kansas City Fed economists.
“Although farm income generally remained low, rates of loan repayment stabilized and farmland real estate markets remained strong,” wrote economists Cortney Cowley and Ty Kreitman. “The third quarter was the first time in seven years that bankers reported a decline in the credit needs of farm borrowers in all districts.”
The regional Fed banks in Chicago, Dallas, Kansas City, and Minneapolis conducted the quarterly survey of agricultural credit conditions. The farm bankers reported an influx of liquidity from Federal Reserve and government programs following the outbreak of COVID-19. The USDA has disbursed more the $20 billion in coronavirus relief to farmers since late spring.
Farmer revenue from corn and soybeans will be much higher than earlier expected, thanks to strong export demand and smaller crops, wrote director Pat Westhoff of the FAPRI think tank. “In August, we projected that the market value of U.S. corn and soybean production in 2020 would be about $85 billion. The corresponding estimate from our preliminary November projections is $101 billion, an increase of almost 19%,” wrote Westhoff in the Columbia (Missouri) Daily Tribune over the weekend.
“This does not mean that farm financial challenges have been resolved, but it does suggest that the situations for Midwestern crop producers is significantly different than it was expected to be just a few months ago,” Westoff wrote.
On Wednesday, the USDA is scheduled to update its estimate of U.S. farm income, now $102.7 billion, highest in seven years due in large part to the largest farm subsidies on record, $32.7 billion.