… Livestock producers, especially hog and dairy, have tighter cash flows now, and it looks like that will continue, Schnitkey said...
Economist: Farms not yet facing solvency crisis
Phyllis Coulter, Illinois Farmer Today
Sep 10, 2020
Despite the recent challenging years in agriculture, Illinois farmers have a relatively low ratio of debt to assets, University of Illinois agricultural economist Gary Schnitkey said.
“We are not in a solvency crisis,” agreed fellow University of Illinois ag economist Nick Paulson at a farm finances webinar offered by the university’s Department of Agriculture and Consumer Economics on Aug. 28.
The observations come from data compiled by the Illinois Farm Business Farm Management program. Data from about half of the 5,500 farms in Illinois is used. There is some lag time — this information comes from 2019 data, before the pandemic.
In 2019, the average farm income went down 48% from $137,704 in 2018 to $71,115 in 2019, said Brad Zwilling, FBFM field staff. In all, 90% of the net income came from federal payments, including the Market Facilitation Program, livestock payments and Conservation Reserve Program, he said.
Net farm income as a percentage of gross income fell from 35% in 2011 to 8.1% in 2019, Zwilling said.
Paulson said older grain farmers who own their own land are in the best position. Not surprisingly younger grain farmers, often those with higher cash rents, are in weaker positions.
Farmers age 60 and higher have about a 10% debt-to-asset ratio. Some of the youngest farmers in the FBFM program are at about 50%. About 60% of farmers have less than a 30% debt-to-asset ratio, Paulson said.
He also noted the average age of participants was between 58 and 60. Over half of the operators are above age 60.
“Younger farmers are in more vulnerable positions in terms of relative debt to assets,” he said. The current situation is “more of a liquidity issue.”
Livestock producers, especially hog and dairy, have tighter cash flows now, and it looks like that will continue, Schnitkey said...
... Schnitkey focused his advice by age group...