Federal aid offsets flagging ag sales
US farmers this season are on track to collect the most federal aid in the last decade after lawmakers early this year raced to allocate emergency funds to help relieve the prevailing economic stress from the Covid-19 outbreak.
Federal assistance is estimated to top nearly $32.2bn this year, according to the US Department of Agriculture's (USDA) September projections. More than 60pc of this season's payouts are funded by emergency aid and assistance amid the coronavirus pandemic.
Lawmakers earmarked more than $30bn in coronavirus assistance between the CARES Act and the USDA's relief package earlier in 2020. The colossal amount of federal aid this year is expected to push net farm earnings to a six-year high despite a decade-low in combined crop and livestock sales as farmers grapple with lower prices and demand stemming from the pandemic.
Cash receipts from crop and livestock sales are expected to fall by 3pc from last year, and American Farm Bureau chief economist John Newton said this year's emergency funding was necessary to buoy farmer balance sheets.
"Without [federal aid] we would see much more pressure in the farming community," Newton said. "The money we are making from the market continues to be under pressure."
Livestock and poultry values slipped as restaurant demand contracted under stay-at-home orders that were implemented to slow the contagion, and the nation's meat processing capabilities were unable to meet the surge in grocer demand, according to Newton.
Meanwhile, corn growers simultaneously grappled with evaporated demand from the ethanol sector, which pushed corn values to new lows and dashed early-year optimism.
The USDA estimates a 5pc recovery from last season in corn demand from the ethanol sector during the 2020-21 crop year, which began this month, although demand is on pace to remain below pre-coronavirus levels. Despite an incremental recovery in corn demand from the ethanol sector during the 2020-21 crop year, Newton added more federal assistance is needed to help keep farmers afloat.
"Folks were optimistic that this was going to be the year," Newton said. "We renegotiated trade in 50pc of our markets [and] we were expecting a big crop. Folks were optimistic that the export market would bounce back and generate the revenue-generating opportunity."
But offshore sales have sagged as Chinese purchases of US agricultural products remain on pace to fall short of the targets laid out in the so-called phase I trade agreement signed in January. Sales to China through July were less than one-quarter of 2020 targets, according to trade data, despite ramped-up purchases this summer.
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