Home Indiana Agriculture News Economic Strain on Farmers Becoming ‘Acute’

Economic Strain on Farmers Becoming ‘Acute’

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So what is COVID-19’s impact on food and agriculture in the U.S.? It is a very disrupting force as Purdue ag economists Jayson Lusk, Michael Langemeier and Jim Mintert cover in their newest webinar, and the financial pressure on producers is enormous.

The current shock to our economy is affecting all farmers, including livestock producers. Lusk, the department head for Agricultural Economics at Purdue University, says it’s very frustrating to those producers.

“They see this margin increasing as prices consumers are paying goes up because there’s not as much meat on the market, but also prices farmers are facing are falling because there’s not as much demand at the packing level,” Lusk explains. “So, I think the problems for producers are pretty darn acute. We have a well-designed system to move those animals through the process, until it doesn’t work, and then it starts putting on an enormous strain on the system.”

Mintert, from the Center for Commercial Agriculture says issues facing farmers include a possible record corn crop, soybean production exceeding 4 billion bushels, and plummeting gasoline, ethanol and meat demand. With the current recession extending worldwide, commodity exports come into question.

“Corn that gets exported, soybean meal that gets exported, to some extent soybeans that get exported, are really all about providing more meat to consumers around the world,” he said. “As incomes weaken because of employment issues and related issues to that, it suggests a weak meat demand environment, not just in the U.S. but worldwide and that could be reflected in some softer export values for both corn and soybeans. And we’re looking at the possibility of a huge carryover from the 2020 crop into the 2021 marketing year.”

Michael Langemeier says net farm income and working capital are both headed the wrong direction right now, painting a pretty bleak picture.

“When net farm income is really low like it looks like it’s going to be in 2020, what do you typically do? Well, you look at your working capital and see if you have the working capital to make payments on debt and to purchase assets. Well working capital has been going down very sharply since 2014, so we’re just going to have more farms in the situation where they’re back is up against the wall, where their working capital is just very low, and a low net farm income, and they’re not going to have a lot of wiggle room to repay debt and certainly to buy assets.”

Not a lot of good news coming from Purdue in this new webinar, but producers already have a good feel for that.