December 30, 2020

US government aid gives 'boost' to farm profits

As US government aid hit a record high during the ongoing COVID-19 pandemic, farm profits are on track for one of the best years in 50 years, even adjusted for inflation, Spectrum News 1 reported.

According to the United States Department of Agriculture (USDA), net farm income this year will surge 43% from US$84 to 119.6 billion, the highest inflation-adjusted level since 2013. Small, local farms, however, are not reaping most benefits and industry experts predict the influx of government money will have a long-term negative impact.

Harwood Schaffer and Darryll Ray at the University of Tennesse wrote recently the increase in profits did not come from the market itself, but payments made through pandemic-related programmes such as the Coronavirus Food Assistance (CFAP), Paycheck Protection (PPP), and Market Facilitation programmes.

"In this context, what is important is the near certainty that ad-hoc and disaster-assistance payments of this magnitude will not continue very far into the future," Schaffer and Ray wrote in their recent "Policy Pennings" column. "It is also important to note that despite these large payments, 2020 farm debt increased by $16.6 billion between 2019 and 2020. This represents the continued increase in farm debt totaling $119.8 billion since 2013 and is relatively unrelated to the coronavirus."

With the expected increase from COVID-19 relief, overall animal product receipts are expected to decrease by US$9.7 billion with declines for broilers, cattle, and swine.

Jim Akers, chief operations officers of the Bluegrass Stockyards in Lexington, says the real financial gain has been with retail and distribution as cattle prices have been low. "The small farms have not reaped the benefits packers and processes have," Akers says. "They have made a fortune, especially in the depths of COVID back in the spring and summer. Packers have a lack of competition with just four major operations in the country. The CFAP program gave direct payments to farmers because of the huge drop in cattle prices. Grain higher than it's been in several years to the point where farmers could make a little money on it. Few farmers sell beef directly, and although there was more of a demand for the product, those farmers did not reap those financial benefits. It looks to be a better year coming up."

Kentucky Commissioner of Agriculture Ryan Quarles in November praised farmers in Kentucky, the biggest beef cattle-producing state east of the Mississippi River, for developing business models to supply restaurants with Kentucky Proud meats and dairy, and more while criticising state leaders for inaction concerning farmers.

"At least 12 states have set aside CARES Act funds to help farmers or increase meat-processing capacity," Quarles says. "Tennessee set aside $50 million for its agriculture and forestry industries alone, Ohio set aside $37.5 million to assist restaurants and bars, and Hawaii is giving out $500 restaurant gift cards to unemployed workers, ensuring businesses are strong, workers get paid, and the unemployed get a meal. To date, Kentucky hasn't done anything like this to support our farmers and businesses."