Coronavirus darkens income prospects for grain farmers

Seven weeks ago, the USDA forecast the highest U.S. net farm income since 2013. Since then, the coronavirus pandemic has driven down grain prices and “reduced (the) grain farm income outlook for 2020,” wrote five university economists on Tuesday. “Given current expected prices, a combination of above-trend (line) yields or government aid is needed to get incomes at levels where financial deterioration does not occur,” said the economists at the farmdoc Daily.

Their blog joined a rising chorus of agricultural economists who expect the pandemic to hurt the farm sector. Director Pat Westhoff of the FAPRI think tank says income could be “significantly lower” than initially expected this year. Economists Brent Gloy and David Widmar say the additional stress of lower corn and soybean prices on the farm economy “is concerning.”

Cash corn prices in central Illinois fell by 13 percent and soybeans by 7 percent in the first three weeks of this month, wrote the team of economists at farmdoc Daily. The decline would amount to $35 an acre for corn and $19 an acre for soybeans, they calculated, if prices remain low into the summer and growers sell the usual portion of their stockpiled crops from now through August.

The declines would be partially offset by crop subsidy payments, lower prices for fuel and fertilizer, and lower interest rates, said the economists. “However, the expected price declines have larger impacts than any increase in commodity title payments or decreases in expenses.”

On February 5, the USDA forecast net farm income, a broad measure of profits, would rise to $96.7 billion this year, with higher revenue from crops and livestock — primarily livestock — offsetting the end of mammoth Trump tariff payments. Although the forecast is somewhat tentative and subject to revision as crop production, season-average prices or farm expenses are known, it pointed to the fourth year in a row of higher farm income.