U.S. farmers prepare to lose money

Despite hefty government subsidies, American farmers will probably lose money this year, say two Purdue agricultural economists.

That would make 2020 only the second time since 2007 that United States farmers have lost money growing crops.

“2020 looks really bad, and it’s almost as bad as what 2015 was,” said Michael Langemeier in a presentation June 12.

Based on today’s forward crop prices, expected costs and projected government handouts, U.S. farmers will make a marginal loss, even excluding farmer labour costs.

“You’re drawing down working capital, taking money from elsewhere.”

Langemeier calculates net margin by taking returns and deducting direct costs and depreciation, but not including a charge for a farmer or farm family’s own labour.

While American farmers are expected to lose money this crop year, their losses would be far higher without the handouts the administration of President Donald Trump has provided to compensate for the impact of the U.S.-China trade war.

From 2007-13 farmers made good money as crop prices soared. But in 2014 profitability dropped to about $75 per acre or less, a cap beyond which it hasn’t exceeded since. Three years — 2015, 2017 and probably 2020 — have seen losses or break-even farm accounts.

In 2018, farmers saw profits, but most of those came from government payments. In 2019, government payments comprised almost 100 percent of U.S. crop profitability. In 2020, those payments might not be enough to help farmers turn a dollar, but they will greatly reduce losses.

“Even with some fairly big government payments… we’re still looking at net farm income that’s substantially lower than what was received in 2018 and 2019,” said Langemeier.

Farmland rent, which is a much bigger element of U.S. farming than Canadian farming, has declined since 2015 and if losses occur this year, about one-quarter of U.S. farmers intend to renegotiate their 2021 rent lower, agricultural economist James Mintert said.

“That’s enough to pull down that average,” Mintert said.

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