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2020 Outlook Not Good for Farmers

(West Lafayette, IN) - Government COVID-19 relief and crop insurance payments are expected to play a larger role in keeping farms in the U.S above water for 2020.


That was among the projections during a June 12 webinar by Purdue University agricultural economists Jim Mintert and Michael Langemeier.


Langemeier said net farm profits have not been above the long term average since 2013 but the outlook calls for 2020 to be the second-worst in terms of revenue left after operating expenses since 2007.


The worst year for net profits during the time period was 2015.

The red ink forecast for 2020 is not expected to approach those dismal levels but could be similar.


Mintert said more COVID-19 relief payments along with crop insurance claims and an unexpected increase in low prices would help but not enough to put farmers close to the much higher earnings from 2007 to 2013. 


“Even with the fairly big government payments we’re still looking at a net farm income that’s substantially lower than what we recorded in 2018 and 2019,” Langemeier said. Mintert said some farmers may have taken advantage of unexpected financial opportunities in mid-March when the profit ratio for soybeans jumped way ahead of corn.


The price of corn noticeably dropped because of a 45 to a 50-percent reduction in demand for ethanol from less gasoline consumed because of COVID-19 travel restrictions. Mintert estimated one million or more acres farmers originally intended to use for corn may have gone toward soybeans to achieve higher crop returns. 


He said the sharp price ratio disparity might have come too late for some farmers with supplies already in hand for planting but others could have had time to make the switch.

The actual planted acres report from USDA is expected to be released at the end of June or early July. “We think some people responded to that. We don’t have a grip on how many.  That’s what the acreage report is going to tell us in a couple of weeks,” Mintert said.


Mintert said the good news for corn growers is the demand for ethanol last week stood at 24-percent of what it was in January since the loosening of stay at home restrictions and should go higher during the upcoming summer travel season. “That’s a positive for corn prices throughout the corn belt,” he said. About 40-percent of U.S. corn is used annually for ethanol production.


Langemeier said profitability for soybeans could be similar to 2017 and 2018. “Those were some very positive years for soybeans, he said. Mintert said USDA projections of more exports from China are another factor working in favor of soybeans but given tensions between the countries whether that happens remains to be seen.


Also not helping corn prices are projections of year-ending stocks increasing from 15-percent to 22-percent this year. Several months ago, Mintert said USDA projected record yields for corn at nearly 16 billion bushels or about 2.4 billion acres more than 2019. He said the sudden price ratio change favoring soybeans before seeds went into the soil could affect the outcome of the early projections.   “A one to two million acre shift from corn to soybeans could easily happen,” he said.


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