Farmers who responded to a mid-July survey from Farm Futures say that if they get another round of payments from the Coronavirus Food Assistance Program (CFAP), they will likely use the money to pay down long-term debt as opposed to spending the aid on operational investments.
The survey collected responses from about 1,050 farmers.
Nearly 40 percent of respondents said they favored using CFAP funds to pay down long-term debt over the other options. The finding correlates with another survey question in which nearly half of survey respondents agreed with the statement, “I worry about paying back the debt I owe.”
This year’s farm balance sheets are forecast to show the highest debt-to-asset ratio for the farm sector since 2003. Farm sector debt is expected to increase by 2.3 percent from 2019 debt levels to $425.3 million in 2020, according to Economic Research Service (ERS) data released earlier this year.
Year-to-date family farm bankruptcies through June are 8 percent higher than the same period a year ago. Filings in the Midwest rose 23 percent during that time as low commodity prices cut profit margins across production agriculture.
CFAP payments will make up over a third of 2020 farm income according to a June report from the Food and Agricultural Policy Research Institute. The percentage could go higher if Congress is able to finalize a second stimulus package before 2021.
Thirty-two percent of farmers ranked investments into enhanced seed, fertilizer, and/or nutrient technology as the second most likely area of expenses upon receipt of CFAP payments. Updating equipment (nearly 25 percent) was third.
Growers in the Farm Futures survey were slightly mixed on their preferences between using CFAP aid to purchase higher-yielding inputs or update equipment. But when survey respondents were asked to choose between the two options, 68 percent of farmers preferred using relief money to purchase seed, fertilizer, and/or nutrient technologies that would increase yields.
Source: Farm Futures