While direct payments to farmers in 2020 are projected to be at historic highs, net farm income excluding those payments is still forecast to be higher in 2020 than by that same metric in 2019, said Carrie Litkowski, an economist with the United States Department of Agriculture’s Economic Research Service, during the second farm income and financial forecast of the year.
The forecast, discussed in a Sept. 2 webinar, is the first of the year to consider COVID-19 impacts. The previous forecast was issued in February before the pandemic gained a strong foothold in the United States.
Changes to the forecast resulting from the COVID-19 pandemic are most evident in the projected amount of direct payments U.S. farmers are expected to receive.
In the February forecast, Litkowski had discussed that projected total direct payments to farms were likely to decrease by 37% this year, largely due to a large projected drop in Market Facilitation Program payments (the current forecast does still reflect significantly lower MFP payments than in 2019).
What that early February forecast could not factor in, however, was the spread of COVID-19 that sparked the U.S. government to issue massive amounts of direct payments to the industry.
According to the current 2020 projections discussed by Litkowski, MFP payments, function of crop price payments and conservation payments are expected to account for well under half of direct payments.
Largely accounting for the projected $14.7 billion year-over-year increase is the “all other payments” category, a category expected to total $23.7 billion. Direct payments from the Coronavirus Food Assistance Program are expected to total $16 billion; Paycheck Protection Program loans (counted as direct payments under the assumption that they will be forgiven) are expected to total $5.8 billion; and all other ad hoc and supplemental payments are expected to total $1.9 billion.
The CFAP total is based on the amount of money said to be available for the program. The application deadline for CFAP payments is Sept. 11. There is some talk of a second round of CFAP, Litkowski said.
With those additional COVID-related direct payments, the total amount of direct payments to farmers, even adjusted for adjusted for inflation, is expected to be at the highest level since at least 2002.
When adjusted for inflation, the previous peak in those years, which occurred, in 2005, is still several billion dollars below the forecast total for 2020.
Taking direct payments — as well as federal insurance indemnities — out of the equation for 2019 and 2020, however, would still leave net income a little higher this year than last, the forecast showed.
Total crop cash receipts are forecast to slightly increase in 2020, while total animal and animal product cash receipts are forecast to fall in 2020.
Livestock farm businesses are in general expected to have a lower average net cash farm income in 2020 than in 2019, led by decreases in the hog commodity specialization, but all crop farm businesses are expected to have higher average net cash farm income, led by cotton, specialty crops and soybeans.
While animal and crop production forecasts look to overall remain relatively stable, Litkowski said, total production expenses are expected to decrease, having a positive effect on net income.
Lower interest expenses are expected to lead the decrease in production expenses, the forecast showed. Feed and labor expenses are among the individual expense items still expected to increase, while fuels and oils and livestock/poultry purchases are among the other expenses expected to decrease.
Total production expenses are projected to fall 2.1% when adjusted for inflation (down 1.3% nominally), which would be the sixth straight year of an inflation-adjusted decline if realized, Litkowski said.
Overall, net farm income, which factors in non-cash items such as depreciation and inventory changes, is forecast at $102.7 billion, up from the February forecast of $96.7 billion, primarily driven by the increased government payments and lower expenses.
Bankruptcies, according to the forecast, are expected to be a little under the rate for 2019, at slightly below 3 bankruptcies per 10,000 farms.
The farm sector will continue to experience financial stress, as the risk of insolvency remains high; however, the likelihood of default remains historically low despite several years of increases, Litkowski said.
The latest forecast did not factor in any potential effects from recent weather events, including the derecho that primarily hit Iowa and Hurricane Laura, Litkowski said. Impacts of those storms are still being evaluated and are more likely to be reflected in the next 2020 forecast, scheduled to be discussed on Dec. 2.
A few weeks ago, my son Henry and I embarked on a father-son adventure. Little planning or preparation was involved. I described our general travel philosophy as “footloose and fancy free,” though it may as well have been categorized as “disorganized parenting.” Nonetheless, campgrounds were secured, the 4Runner packed, and we set out to explore Michigan’s U.P., from the Porcupine Mountains all the way up to Copper Harbor. I was excited to show my son some of the same landscapes that have informed who I am, and how I interact with, and value the natural world.
On a beautiful afternoon, we joined many other tourists on a circuit of trails beside a series of waterfalls. After walking a path to Lake Superior, Henry suggested we crawl down a steep embankment to the river and go swimming. And so, I followed him onto a slippery rock shelf where we changed into bathing suits and edged into the river.
The water was not Lake Superior frigid, but warm, and flowing around us swiftly, but not dangerously. We launched ourselves into the current and began muscling upriver, and I should add that if, dear reader, you feel any sort of anxiety for us, or for Henry, know that he is an elite competitive swimmer; me: not so much.
That was when we saw the amphibious snake weave its way off a nearby shoreline and into the current directly ahead of us. It was not a big snake, but it was a snake, in water, moving much more confidently than me.
I began to have second thoughts about our little maneuver, but eventually the snake moved far enough away that we could push on, towards an outcropping and pull ourselves out of the river.
There we crept along shore before finally diving into a deep pool and allowing the water to move us back towards our shoes and clothing. Henry was delighted, and to my great surprise, so was I. There we were, father and son, floating down a northern river, our feet surfing an underwater column of rock, as the current carried us out toward the big lake.
I’ve been carrying that memory around with me for weeks. And like the best memories, it wasn’t earned easily; had we remained on the well-trod path, we would not have been immersed in the river’s flow. It was a parenting moment, a decision, where certainly the most prudent thing to do, the cautious thing to do, would have been to say, “This isn’t safe.” Or, “Henry, there’s about a hundred signs warning us not to do this.” And yet, I knew my son. I knew what he was capable of. I knew that he is an accomplished swimmer. So we dove in.
Feels like we’re diving in again, this autumn. Diving back into life, into school, into “normalcy.” Knowing what to do right now, as a parent, is impossible. The older folks in my life just tell me that they’re glad they’re not in my shoes, glad they never had to supervise any distant-learning. Glad they didn’t need to parent through a global pandemic. And those people in my life who were identified as members of the Greatest Generation, who lived through World War II and Korea and polio and the Cold War … well, most of those people are gone from my life now, passed on.
There is no parenting guide for what we’re all facing this fall. I suppose not sending our children back to school would be the safest decision, but I also believe that their teachers are better equipped to educate them than I am, at least on most days. I’m also confident that as their parent, as an adult with a job to do, sending our kids back to school is the healthiest thing for me. I want to at least try to make things work, even if I know there’s a component of risk. The past seven months or so have been some of the most challenging times in my life as my every routine was busted into smithereens. I’ve often felt like there has been a malevolent vibration, an anxious frequency in my every waking hour. Uncharacteristically, I’ve often felt very sad, without any clear reason. I want these sensations to stop, even as I know that in all likelihood, in-person schooling is probably a short-lived experiment, a vaccine is farther off than we’d all like, and that this virus has shown us all, like an X-ray, exactly where we are broken, as individuals, and as a society.
My favorite writer, the great Jim Harrison, was a big aficionado of river swimming. He once wrote, “You can’t row or swim upstream on the river. This moving water is your continuing past that you can’t retrace by the same path that you reached the present, the moment by moment implacable difference of time.”
It is a tenuous time to be alive; it’s probably been 20 years since I’ve felt so unsteady, simply walking through my life. But rivers and water have been a steadying metaphor for me since I read Norman Maclean’s “A River Runs Through It.” Look, you don’t go swimming when the river is too high or too fast, or when you’ve had too much to drink. You don’t underestimate the river. And a life preserver is almost always advised. But you also shouldn’t fear the river, because there is enlightenment in being held by its current, in seeing the sheer joy on your boy’s face, as he experiences the new and unexpected.
Parenting, I think, is all standing on the riverbank, understanding nuances and dangers, and guiding a young swimmer into unknowable waters. Parenting, I think, is being aware that time is a river rapidly flowing toward an unknown waterfall. To all the parents, educators, and health care providers out there, I wish you good health and good judgment this fall.
While the benefits of international trade aren’t specifically called out on a farmer’s milk check, growth in the export market will ensure a strong dairy industry in Wisconsin and the U.S., according to state agricultural commodity leaders.
Exports provide a market for 15 to 17% of U.S. milk production, resulting in the equivalent of all the milk produced on U.S. dairy farms in one day of each week now going overseas, National Milk Producers Federation President and CEO Jim Mulhern said Sept. 1 during an AgTalk town hall webinar hosted by the U.S. Dairy Export Council and the National Milk Producers Federation.
“When I stand in front of room say, ‘If we don’t have exports, one day in seven of your milk doesn’t have a home now. Where does it go?’” said Chad Vincent, CEO of Dairy Farmers of Wisconsin, the farmer-funded organization that markets state dairy products. “Exports are an important piece of the puzzle. We have to continue to build demand. I think the more access that we get, the stronger we do internationally, the more competitive we can be.”
Since 1996, dairy exports have increased more than 600%, Mulhern said, adding that there is “tremendous potential untapped opportunity” for future exports but that the U.S. must move quickly to take advantage of those opportunities.
“In far too many markets we’re seeing growing opportunity gaps due to our competitors’ aggressiveness at racking up new trade partners,” Mulhern said. “The fact is from a trade policy standpoint, we’re actually falling behind our competitors, particularly the European Union, and the United States cannot let these opportunities with important markets slip away for dairy.”
Between 20 and 30% of everything grown, raised and produced in this country has to be exported, according to Tom Vilsack, who moderated the Sept. 1 AgTalk town hall. Vilsack, president and CEO of U.S. Dairy Export Council and previously the U.S. secretary of agriculture during the Obama Administration and governor of Iowa, said between 15 and 20% of farm income is directly related to those export sales.
“If we don’t export that much, essentially, many farmers don’t do as well as they possibly can do. And clearly exports are going to continue to take an ever increasing important role in the future,” Vilsack said.
The United States population represents roughly 4% of the consuming public globally, he said, so seeking trade opportunities with other countries gives the agriculture industry room to grow.
“It is important for us to have a discussion about trade and to make sure that the trade policy of the government is one that helps to support and sponsor agricultural trade,” Vilsack said. “Agriculture has been a bright spot for trade. Historically for the United States (agriculture) enjoyed a trade surplus for many many years. Not only do we help stabilize farm income with exports, we also create and support a number of jobs throughout the United States in processing facilities and export related jobs.”
In Wisconsin, 90% of the milk produced in the state gets turned into cheese and 90% of that cheese goes outside the state.
Sartori Cheese is an 81 year old fourth-generation family business that produces specialty cheese for the retail ingredient food service markets. Every day, Sartori purchases 100% of the milk from 87 Wisconsin family farms, said Sartori Cheese President Jeff Schwager, and their products are available in more than 50 countries.
“Any success that we have in the global markets though today is hard-fought,” Schwager said. “Fair trade on a bilateral basis would allow dairy to be even more significant to our economy and allow the farmers and processors to capitalize on their quality products and their efforts to be the best in the world.”
While Canada and Mexico are the largest importers of agricultural products from the U.S., Mulhern said a strong potential exists to meet a growing demand for dairy in Asia, North Africa and the Middle East with with American-made products.
Randy Romanski, Wisconsin Department of Agriculture, Trade and Consumer Protection secretary-designee, said getting a handle on the global coronavirus pandemic is key to strengthening and building on Wisconsin’s agricultural exports.
“Building and maintaining relationships is the single most important aspect of international business, and it’s best done in person,” Romanski said. “There’s really no substitute for (meeting face to face). We have to have the ability to gather travel safely to other countries.
“What we found is that companies can maintain existing relationships over the phone, but it’s extremely important for us to make new connections in person.”
Romanski said that entering 2020, with trade agreements in place and tariff issues starting to subside, there was some optimism that this year would be would be better for the agriculture industry than the past several years with low commodity prices have been.
Despite COVID-19, the ag industry has seen some growth and improving trends, Romanski said.
“We still haven’t made up for the losses that we saw in 2019, but these increases have been surprising and well-received,” he said.
Romanski said a trade deal with China and resulting exports starting to increase as China’s swine population starts to rebound and all three countries ratifying the U.S.-Mexico-Canada Trade Agreement were positive signs for the industry.
“We’ve seen just how interconnected our global community is. Keeping the food supply chain strong and dairy exports moving has never been more important,” Mulhern said. “America’s dairy future growth is really tied to the success of global markets. When global dairy prices fall, we feel that impact and prices here at home. When global markets rise, American dairy farmers, the American dairy industry, benefits.”
Vilsack said results of the AgTalk town hall webinar and a series of similar webinars will culminate in a report that can be delivered to the administration after the 2020 election to help guide future trade policy.
Vincent said it’s important for those involved in the agriculture industry to keep elected officials aware of issues impacting the community.
“Within Wisconsin alone, very few of the elected officials today come from an ag background,” Vincent said. “Ten, 20, 30 years ago, that wasn’t necessarily the case, so our ability to get in and educate and provide insights and provide information to these elected officials is really important.”
For more information about the AgTalk town hall webinar, visit www.agtalks.net.