COVID-19 dims prospects for grain farm income in 2020.
The estimate for grain farm revenue in 2020 has been lowered by the coronavirus (COVID-19), according to agricultural economists at The Ohio State University and The University of Illinois. Their opinions were published in a research published on March 25 by farmdocdaily@illinois.edu with the title “What we know about income outlook for crop farms given COVID-19.”
The economists stated, “Projected revenue for 2020 and expected revenue from remaining old crop sales are reduced.” The possibility of increased income from commodity titles may offset these decreases to some extent. Additionally, there’s a likelihood that some input costs will decrease, especially those of fuel and nitrogen fertilizer. However, since COVID-19 control measures were implemented, the income picture for grain farmers has become less favorable.
The analysts noted that worries about farm cash flows and revenue in 2020 existed even before COVID-19, particularly in light of the fact that Illinois’s grain farm income decreased significantly in 2019 compared to 2018. The analysis found that although average net incomes in 2019 were lower than in 2018, they were still close to five-year norms due to payments made under the Market Facilitation Program, crop insurance, and enhanced support for preventing plant acres through payments made under the Wildfire and Hurricane Indemnity Program. The economists said, “Or else incomes would have been at very low levels.”
The economists noted that COVID-19 may lead to lower prices for maize and soybeans. If this is the case, above-trend yields for the 2020 crop and more government assistance will be necessary for 2020 earnings to be high enough for the majority of farms to avoid further financial decline.
They made the observation that a significant amount of maize and soybeans from the 2019 old crop still probably need to be priced before the fall harvest. This will be carried out at reduced cost points. The average cash corn price in central Illinois from January 2 to February 28 was $3.78 per bu; however, the price last week was $3.30 per bu. Prices for beans in central Illinois from January 2 to February 28 averaged $8.89 per bushel, down from last week’s average of $8.31 per bushel.
The analysts declared, “The future paths of cash corn and soybean prices are uncertain.” It goes without saying that selling older produce in this climate has its difficulties, to which there are no simple solutions. It is reasonable to state that the anticipated cash flow from the old crop has decreased.
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Increased payments under the Price Loss Coverage and Agricultural Risk Coverage programs may result from lower crop prices for the balance of this marketing year and possibly the following one.
Additional mitigating factors could include reduced costs for drying due to lower fuel expenses and reduced pricing for nitrogen fertilizer as a result of less energy use.
The COVID-19 pandemic has negatively impacted Illinois grain producers’ income prospects, according to the analysts’ conclusion. “After COVID-19, lower prices are expected to persist, which will reduce crop revenues for 2020.” Declines in crop revenue may be partially countered by increased commodity title payments, and certain non-land costs may go down. Still, the anticipated price reductions have a greater effect than any rise in commodity title payments or fall in costs. In light of the current projected prices, incomes must be raised to a point where financial degradation is prevented by either above-trend yields or government assistance.