An Indiana farm economist says the difference in the farm economy from 2020 to 2021 is remarkable.
Dave Widmar with Agricultural Economic Insights in West Lafayette. He says the economic improvement has taken place within a short period of time.
“We had a very dark vision last summer, it’s hard to make a list of positive things that are happening, and now of course we have a very strong vision with a long list of positive things for us. The big chunk here is the rise in commodity prices: commodity prices have picked up, but it only started happening last September, and it’s been playing out over the past few months. The outlook wasn’t as good six months ago so that has been a huge part of it, especially for corn and soybean growers.
He says the producer support payments have also strengthened the agricultural economy.
“Another aspect of it has been the direct payments, and just a lot of stimulus payments in the economy through direct payments to producers, PPP loans, low interest rates; all kinds of activities take place in the agricultural economy.
In 2021, another benefit to the economy was a low cost of production.
“When we think about the approach of 2021, we had a fairly inexpensive structure in place. Of course, that narrative has quickly changed over the past six months. Fertilizer costs, for example, were around $ 9 an acre in fall 2020, closer to $ 130 or $ 140 an acre today. We have seen the value of farmland rise, cash rental rates rise, while machinery and family living expenses are likely to rise as well. And so, another part of the high profitability situation here, really in 2020 but also in 2021, is a low cost structure. Of course, this will start to relax, but it’s important to recognize how we got to a pretty solid situation and in such a short time.
The next USDA Farm Income Report is due in September, which will paint a clearer picture of what lies ahead.
“Where exactly is the agricultural economy and where we might be heading into 2022. We need to step back and unbox this in different ways. So the first preliminary estimate for February was below 2020, so 2021 would be below 2020 but above the long-term average. And so, I think we always have to think about what lens we compare it to. It’s pretty clear that the farm economy, all the information available today, indicates that the 2021 farm economy will be much stronger than the long-term average, especially the average we saw from 2016 to 2019. “