As we begin to be comfortable with writing 2021 on our checks, ag economists are telling us that the farm economy apparently did quite well in 2020, with the projection for net farm income to be the highest since 2013. But the old devil in the details spins another story.First, the $900 billion coronavirus relief bill that was signed by President Trump on December 27th includes $13 billion in aid for farmers and ranchers. Under this legislation, farmers will receive $20 per planted acre for about 240 million acres of barley, corn, sorghum, soybeans, sunflowers, upland cotton, and wheat, which will account for about $5 billion. Other minor crops receiving the $20 per acre payments that are grown in the Four Corners region include alfalfa, canola, oats, and some specialty crops. Beef producers will also benefit from the aid, with payments of $25 for feeder cattle weighing more than 600 pounds, $7 per head for feeders under 600 pounds, $63 per head for fed cattle and payments for cattle that have been culled from herds. Small livestock producers may also benefit from a provision in this bill. About $60 million was earmarked for grants to small meat and poultry processors so they can upgrade facilities, qualify for federal inspection, and sell products across state lines.
But a recent farm publication headline, “Farmers: What to do with all that extra cash?” begins to cast some doubt on how great the year was for farmers and ranchers. The article quoted Paul Mitchell, director of the Renk Agribusiness Institute at the University of Wisconsin. He pointed out that with all of the government payments in 2020, some farmers had lots of cash to spend, so he was making a case for them to spend it wisely. National net farm income is forecast to increase from $83.6 billion in 2019 to $119.6 billion in 2020, but most of these extra dollars have come from what economists call ad hoc disaster payments, that have grown from $1.4 billion in 2019 to $32.4 billion in 2020, and that’s not counting the $13 billion that was just approved by Congress. Ag Economists recommend that farmers and ranchers pay close attention to management of their businesses in 2021. They point out that producers need to realize that the extra income in 2020 didn’t come from sales, and that the ad hoc disaster payment cupboard is likely be bare once the $13 billion corona virus3 payments are made. On top of these concerns is a the $16.6 billion increase in farm debt in 2020, that could haunt producers who are overextended in the new year.
Austrian School economist, historian, logician and sociologist Ludwig von Mises wrote, “Government cannot make man richer, but it can make him poorer”