Government

Federal checks were a savior for many farmers in 2020

Government payments spike to 40% of farm income

Debris from a building damaged by the Aug. 10 derecho lies in a farm field south of Shellsburg in early November. (Cliff
Debris from a building damaged by the Aug. 10 derecho lies in a farm field south of Shellsburg in early November. (Cliff Jette/Freelance)

Thanks to the government paying nearly 40 percent of their income, U.S. farmers on average were expected to close out 2020 with higher profits than in 2019 and the best net income in seven years, the U.S. Department of Agriculture said in its latest farm income forecast.

Farmers faced challenges throughout 2020 that included the impact of trade disputes; low prices that drove down cash receipts for corn and hogs as well as for cotton, wheat, chicken and cattle; and weather difficulties such as drought in some areas and an the Aug. 10 derecho stretching from South Dakota to Ohio that centered on Iowa.

Farm cash receipts are forecast to decrease nearly 1 percent to $366.5 billion — the lowest in more than a decade, measured in real dollars.

Direct federal government payments saved farmers’ bottom line.

Farmers overall saw a 107 percent increase in direct payments from 2019, when a third of net income came directly from the government.

The effects of the money vary from one farm to another, depending on whether a farmer owns the land, has significant capital from which to draw, has manageable debt and aggressively manages wide commodity price swings.

“The payment to one farm could be a matter of life and death of that farm, and for another farm maybe just makes it not quite as bad of a year as it was going to be and everywhere in between,” said Mike Paustian, a farmer who raises hogs and grows soybeans and corn near Walcott.

“I’ve described it as, if you’re drowning and somebody throws you a life preserver, you’re not going to argue too much about grabbing ahold of it.”

ARTICLE CONTINUES BELOW ADVERTISEMENT

Excluding USDA loans and insurance indemnity payments made by the Federal Crop Insurance Corp., farmers are expected to receive $46.5 billion from the government — the largest direct payment ever.

That includes $32.4 billion in assistance through coronavirus pandemic relief food assistance and Paycheck Protection Program payments to farmers.

Additional support comes from more traditional revenue loss programs due to low commodity prices, compensation for trade disruptions resulting from tariff battles and conservation programs assistance.

Federal court bankruptcy data shows 433 U.S. farms filed for reorganization as of Sept. 30, down from 454 during the same period the previous year. But in Iowa alone, there were 27 farm bankruptcies in 2019 — more than double the 13 bankruptcies in 2018, the American Farm Bureau Federation reported.

Overall, net farm income in the United States is expected to increase 43 percent from 2019 to $119.6 billion, the USDA estimated.

Farmers will see the highest level of net farm income, a broad measure of profitability, since 2013, the agency said.

One northeast Iowa farmer said without the federal money it would have been difficult to make ends meet this year, but it began to feel as if the government checks were motivated by politics from a president seeking support for re-election.

“At first it did help, but then we kept getting payments and I don’t know that those were warranted,” said Rick Juchems, who grows corn and soybeans and custom raises hogs.

ARTICLE CONTINUES BELOW ADVERTISEMENT

“The markets already had recovered quite a bit and they’re recovering yet more, so it helps some but it’s one of those things that the second one was more than we needed.”

In a late October campaign appearance in Omaha, Neb., President Donald Trump said he believed farmers were better off getting government payments than relying solely on their farming receipts.

“In fact, some people say our farmers do better now than when they actually had a farm,” he said.

Many top farm states voted for again for Trump in November, including Iowa, Nebraska, Texas and Kansas. Several, however, left Trump to vote for Democrat Joe Biden, including Wisconsin, Michigan and Georgia.

Bill Gordon, who with his father raises soybeans and corn in southwestern Minnesota, hopes for improved free trade agreements and a less confrontational approach in 2021.

“Volatility definitely causes volatility,” he said. “And so if we can get these free trade agreements set up, that are better, and not as confrontational but still benefit both sides, that just benefits agriculture and rural America.”

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.