Thanks to a combination of increased commodity prices, favorable growing conditions and significant support from the federal government, most area farmers appear to have enjoyed a strong bounce back year in 2020 after years of lean times.
A newly released report from the University of Minnesota Extension and the Minnesota State Agricultural Centers of Excellence shows that median farm income rose to above $106,969 last year, more than twice the amount recorded in any of the previous seven years. The bounty was spread out around the market, as all types of farms saw net positive income for the first time since 2014. The positive outcome seemed far from certain in the spring or even into summer as markets were thrown into turmoil by the COVID-19.
Broader uncertainty and challenges are likely to persist for several years as the world economy recovers from COVID. Still, local farmers like Wheeling Township’s Keith Schrader are relieved to get a break after a lengthy spell of lean times.
“The money we made last year has really gotten us on more solid footing,” he said. “Over the last several years, it had been really tough to show positive cash flow.”
Farmers benefited from a strong rally in commodity prices as the year progressed, especially as COVID-related disruptions in supply were addressed. Government payments also helped make the year a success, accounting for 12% of gross farm income.
Local farmers benefited from increased yields after several rough years and saw key markets deliver. China made several major commodity purchases and trade relations with Mexico and Canada were bolstered by the U.S.-Mexico-Canada Free Trade Agreement.
Still, not everything is rosy. The report notes that farm income is expected to tick down by about 8% in 2021, mainly due to a loss of government subsidies. The $1.9 trillion American Rescue Plan recently approved by Congress includes no assistance for farmers.
In addition, farm operating expenses are expected to trend up as energy and input costs increase. While strong commodity prices may benefit crop farmers, they can be expected to trim into the margins of livestock, hog and poultry producers next year.
Rice County Farmers Union President Steven Read said that while many of the Department of Agriculture’s Economic Impact Payments” and other assistance went to large operations, smaller farmers were able to get a crucial boost from them as well.
Even without government support, Read said that middling conditions in South America along with a surprisingly robust return of export markets are cause for optimism. However, some farmers weren’t able to take full advantage of the rise in prices because they had to sell early.
Medford area dairy farmer Scott Balzer said that after years of middling prices, COVID and related shutdowns devastated his business as market demand dramatically shifted away from traditional buyers like restaurants and schools.
Fortunately, Balzer Dairy got back on its feet with help from COVID-19 Economic Injury Disaster Loan (EIDL) from the U.S. Small Business Administration. While markets have remained "choppy," Balzer said that improved crop prices along with internal changes to the business have helped to shore things up.
Even as things have improved, Balzer is still concerned about the overall trade picture. He said that the EU's move away from using U.S. dairy has played a key role in depressing dairy prices for years, and accused China of continuing to manipulate markets to its benefit.
Some pork producers, like Steele County Farmer Brian Keck, were hit especially hard by what the otherwise mostly sunny University of Minnesota report described as “once-in-a-lifetime disruptions for many of the state’s hog producers.”
As COVID-19 wracked many of the state’s meatpacking facilities during the spring, pork producers found themselves with hogs they struggled to get rid of. Keck was unable to sell his pigs to his traditional buyers and was instead forced to take losses that offset his gains on the crop side.
“If you’re just a crop farmer you probably did alright, but livestock took a bath,” he said. “We ended up breaking even for the year, and for a while we couldn't even get rid of our pigs.”
Fortunately, Rice County farmer Bruce Peterson noted that hog futures prices have risen to their highest levels in six to seven years. He noted that an outbreak of hog fever in China, known for its heavy pork consumption, has played a key role in boosting U.S. markets.
“Last year was a tough year for hog producers without a doubt,” he said. “But as we get into 2021, things are clearly looking much better.”