Why 2019 Might Have Been One of the Better Financial Years for Farmers

03:05PM Jan 03, 2020
Piggy bank
Two ag lenders say some producers are looking at stronger financial footing heading into 2020. They explain how solid risk management and MFP each played a major role in 2019.
( MGN )

2019 was a year of many challenges. From late planting, to some farmers not being able to plant at all, the spring seemed to tell a story of a bleak financial picture in agriculture. But as surprising yields came in, ag lenders say 2019 may be the best financial year some farmers have seen in the past 5 years.

“I don't think anyone had the ability to predict the positive outcome that it looks like we're going to see this year, because there was so much negativity,” said Alan Hoskins, of American Farm Mortgage. “We were so late getting crop in, so now I don't think there's anyone that could have predicted this."

Even in Nebraska, Keith Knudsen of Security Bank says his area got flooded early, but many farmers were still able to get in and plant. Thanks to prime growing conditions in the summer, yields have been phenomenal.

“In our market in northeast Nebraska, what we've seen is really good yields again, for the  third year in a row, but the way we got there is what has been really so stressful for our producers,” said Knudsen.

Both ag lenders know the picture isn’t rosy everywhere, but the additional Market Facilitation Payments (MFP) definitely helped producers in 2019.

“For quite a few of our producers, I think the additional payments are going to be the difference between profit and loss,” said Kndusen.  “But there are a lot of other producers who were able to take advantage of some market opportunities and that - along with the payments - are going to create probably one of the better years they've had in the last five years.”

“I would say that if you look at a percentage in our area, I would say depending upon how a producer did on marketing, because that's the key component, I would say probably maybe 20 to 25% will be better off in 2019 than they were in 2017 or 2018,” said Hoskins “But again, it's going to tie directly back to their ability to control their risk management.”

How many producers are in a cash flow bind? Both ag lenders say it’s a small number.

Maybe 10% or less, I would say, but we will know a lot more after we get into the taking the new financial statements this year,” said Knudsen, noting their neighbors to the north in areas like South Dakota are in a different situation, forced to take more prevent plant.

Hoskins says he had some producers unable to plant in southern Illinois and southern Indiana, as well, but says the one who chose to go ahead and plant, are happy with that decisions.

“We haven't seen too many people disappointed in electing to go ahead and plant,” said Hoskins. “It was just some of them were in a position where the prevented planning made sense to them. They took risk out of the equation by doing that also.”

Watch the full marketing discussion on U.S. Farm Report.

USFR 01/04/20 - RT1