AgAmerica Report Advises Farmers to Prioritize Risk Management
We all need to eat—but farmers' jobs are getting harder. AgAmerica offers resources and strategic guidance in new economic report.
It doesn't take an expert to realize we are in challenging economic times. Since Covid disrupted supply chains around the world, consumers have noticed empty shelves at grocery stores and inflated prices for everything from Christmas trees to eggs.
The challenges of feeding a nation aren't new to farmers—some of the original essential workers, who are regularly overlooked and underserved. Yet farmers enjoyed record net income last year and land value appreciation in direct correlation with inflation. Despite these gains, farmers also navigated volatility—including high input costs, supply chain issues, labor shortages, and extreme weather, which will persist into 2023.
"We love to see that farmers fared well last year, but they've got some clouds ahead with geopolitical issues, high interest rates, and pressure to increase crop yield to feed a growing population. Farmers need to consider risk management, but we prefer to call it "optionality"--creating options for any scenario to create as much stability as possible in a volatile environment," said Brian Philpot, President & CEO of AgAmerica Lending.
Exclusive Look: Key Report Takeaways on the U.S. Farm Economy
Net farm income is projected to reach a record in 2022, with a 13.8% nominal increase from 2021.
A 24 percent increase in total farm cash receipts in 2022 is expected to be partially offset by a 19 percent increase in production costs and more than 30 percent drop in direct government payments.
The U.S. Energy Information Administration estimates that the average cost for heating oils will be 27 percent higher this winter, but could range anywhere from 15 percent to 40 percent higher depending on weather conditions.
Volatile stock prices, inflationary pressure, and the threat of a recession had investors pulling out more than $250 billion of U.S. investment funds through November 2022. However, the appreciation of farmland values increased by 11-14%.
Bottom Line: There are a few bright spots in agricultural finance heading into the new year. The good news is high commodity prices and strong global demand have helped offset higher input costs in 2022 for the American farmer. The not-so-good news is that uncertainty continues to permeate the farm outlook in 2023, creating elevated price-cost squeeze risk should commodity prices fall in this period of high production costs. Fortunately, there are preventative steps farmers can take to ensure their operation can safely navigate the unknown.
AgAmerica is finding solutions to support farmers, who face increasing adversity and demand for productivity to feed a growing population.
As a trusted financial lender for farmers, ranchers, and landowners across the nation, AgAmerica provides financial resources and counseling to help sustain the future of agriculture and keep farmland in the hands of farmers. Visit AgAmerica.com to learn more.
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