URBANA, Ill. - A live poll showed that 65 percent of the 250 farmers attending a recent UniversitAy of Illinois farmdoc webinar expected to incur income losses in 2020-2021. A discussion on what factors will influence farm income and how to minimize income losses was led by farmdoc team member Gary Schnitkey, who advised farmers to start considering their 2021 planting decisions today. 

“First, our 2019 returns (estimates) have been lowered due to lower prices. We’ve lowered those estimates 20 to 30 cents for corn and soybeans,” he began. “Corn is now sitting at about $3.55 (per acre) and soybeans at $8.55. This will vary from farm to farm depending on how much was marketed.”

U of I economists are confident that farmers will receive some funds from the Coronavirus Food Assistance Program (CFAP), which should soon open for enrollment for producers who suffered eligible losses in row crops, livestock or specialty crops. So confident, in fact, that Schnitkey is including a $100 per acre input from the program in his projected farm income outlook.

“We are associating $20 of that for the 2019 crop and $80 for the 2020 crop,” he said. “Even given that, we are looking at lower overall returns from 2019 to 2020. Corn in particular will be going down, while soybeans will come up a bit maybe because we are putting about the same amount of CFAP money into soybeans as we are corn. If you average those together, corn and soybeans look worse in 2020 than they did in 2019, even with the $100 in support.”

Schnitkey’s projections for 2021 are based on slightly higher prices for corn and soybeans, with no additional CFAP or Market Facilitation Program (MFP) payments to farmers. Without such support, very low returns are again in the cards, he predicted. “We again take a step down. We see corn coming down $50 and soybeans more than that. Again, we are taking away the $80 in CFAP payments into 2021. That raises some issues, the big one being cash rents for 2021.”

The farmdoc team advises caution in trying to set 2021 cash rents, considering the wide number of variables that could affect farm income. “I would advise evaluating price prospects at the end of the summer, when we’ll know what the futures market will be saying about what 2021 will be looking like. If they are suggesting low $3 corn and low $8 soybeans for cash prices in 2021, either lower cash rent or use a variable cash rent,” Schnitkey said. 

“That sounds like a broken record from us,” he noted. “But depending on how long the tails from COVID-19 are, 2021 could be a poor year. If you look at 2018, 2019 and 2020, the MFP and CFAP are big parts of what have been making our economics work. Looking forward to 2021, be cautious of setting cash rents.”

Schnitkey included crop rotation decisions in his advice for farmers looking ahead to 2021: “Are we looking at a continuation of $3 corn and low $8 soybeans into 2021? That is a real possibility. Right now, if you’ve got any acres left, consider planting soybeans on them. Soybeans have taken less of a hit than corn. Also consider the PPP and EIDL loan programs from the SBA; if you haven’t made an application you should think about it. And by all means, conserve any working capital that you’ve got.”

In addition, producers should adjust their 2020 crop marketing goals to the new, coronavirus-era lower price scenario, he said. “We think we are looking at lower prices – and we are – but they could be worse. With a bumper crop, or above trend yields, we can have below $3 corn and below $8 soybeans. Hedging some of those now or continuing the hedging selling process is probably a prudent risk management move. And again, there is a danger point for setting cash rents for 2021.”

Also contributing to the May 15 webinar were farmdoc team members Nick Paulson and Jonathan Coppess. Paulson commented that events beyond farmers’ control – the intangibles – have had a vast influence on farm economics from 2018 through today. “Trade wars beginning in 2018, flooding in 2019 and the COVID pandemic in 2020 have provided one whammy after the other,” he explained. “Can we continue to rely on these kinds of ad-hoc, as-needed support programs? They are much harder to plan around than what we see in crop insurance and commodity title programs.”

How and when USDA will distribute the $16 billion allocated to agricultural producers under the CFAP has still not been announced by the agency, Coppess noted. “We are in a realm of uncertainty about what the USDA is going to do and how it is going to fit into farmers’ budgets,” he said.