When you look at the prices we are seeing for commodities, it isn’t surprising to see that experts are estimating higher incomes for farms in 2021. Sure, prices aren’t what they were earlier this year, but if you locked in early in the year, you would still enjoy those prices. However, even if you didn’t lock in prices, they are currently very nice. The X-factor in any look at the rate of increase in farm incomes is the input costs. They always seem to rise with commodity prices, but never follow them back down.
The Food and Agricultural Policy Research Institute (FAPRI) released its baseline analysis for farm incomes for 2021. Dr. Pat Westhoff is the director of FAPRI, and he says these numbers aren’t a surprise.
In 2020, when we saw the increase, it could easily be attributed to government payments which helped keep farmers afloat during the economic crisis caused by the COVID-19 pandemic, this year we can say that even though similar payments were contributing factors to the value, they weren’t the primary factor.
The price forecasts for our crops and livestock are anybody’s guest in the next few months.
Input costs are also rising, and that puts a dent in those increased incomes.
Even though debt-to-asset ratios have improved in the short-term, it may not last according to Westhoff.