Meat Export Challenges — How Farm Finances Have Changed in 2020

How Farm Finances Have Changed in 2020

Shifts in the economic landscape and farmer sentiment.

At the start of 2020, sentiment among American farmers was generally optimistic. The first phase of the U.S.- China trade agreement was underway, with the United States-Mexico-Canada Agreement (USMCA) right behind it. Farmer sentiment reached a record high in February and Agriculture Secretary Sonny Perdue stated that Market Facilitation Program (MFP) payments would likely not be needed this year.

Then a global pandemic came along and flipped those projections upside down.

Commodity prices experienced fluctuation across the board — some sectors hit harder than others — as businesses closed and people stayed home. Supply-chain disruptions reverberated through the agriculture industry, and farmer sentiment declined by more than 40 percent between March and April.

Although the COVID-19 pandemic has shifted the economic landscape that was originally predicted at the start of 2020, optimism is slowly beginning to return as farmers reassess the financial structure of their operations and adjust their business plans to compensate for factors that could drastically affect their profitability in 2020. The five major factors that farmers are monitoring include: ❚ farm labor shortages; strained global trade; food supply-chain disruptions; decline in farm income; and limited government aid.

HOW FARMERS ARE MOVING FORWARD

American farmers and ranchers are proving their resiliency yet again and finding innovative ways to continue feeding the American people. To account for financial factors that have changed the economic landscape of 2020, farmers and ranchers are adjusting their financial strategies in two notable ways.

Taking a conservative approach

The general consensus among American farmers is that now is not the time for drastic change. The essential nature of the industry indicates a strong rebound potential that we have already begun to see as we reach the end of the second quarter of 2020. Now is not the time for big expenditures, but rather conservative action and preparation. Having cash on hand to stay operational is crucial in times of economic upheaval.

“Cash is king right now. Look at your balance sheet, and if you don’t have what you feel like is enough potential working capital, talk to your lender about your line of credit. Think ahead rather than wait until the last minute and hope. Plan for it, right now. Farmers have to have cash on hand and available credit to weather the storm,” says Brian Philpot, CEO of AgAmerica Lending.

The uncertainty in global trade and border closures is causing many farmers and ranchers to focus their efforts internally. The renewed appreciation for agriculture across the country has also ignited a cultural movement to support American-grown products in local areas.

Community-supported agriculture programs are thriving, and farmers are connecting directly to consumers now more than ever before.

Editor’s note: This article is from AgAmerica Lending via the AJ Daily ▫

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