Date of this Version
Cornhusker Economics, May 18, 2022
While the 2021 Average Farm Financial Data summary is not complete yet, we have enough information to start drawing some conclusions about what the numbers mean for farmers and ranchers in Nebraska. The conclusions that can be made are not only on the 2021 statistics but also on how 2021 will supply a boost to the financial health of those operations for 2022 and beyond. The preliminary average net farm income looks to be the highest recorded in the history of our data, dating back to 1976. Many factors combined to make 2021 a fortifying year for many Nebraska Producers. At the beginning of 2020, prior to rumors of a new virus, the cash flows we prepared for producers looked as bleak as any I have ever seen. It was not a matter of how much money operations would make but how much working capital would be burned in hopes of better things to come. I was preparing to brush off the bankruptcy tax rules as the prosperity of the years 2007 -2012 was gone. For example, in 2012, the average working capital to gross revenues was 51.4%, but by the beginning of 2020, it had eroded to 21.1%. Most operations were in a position of low liquidity and the average corn price remained below the cost of production. The following months were spent learning new laws rather than brushing up on old laws as we had to rapidly keep up with new programs from the government in support of relief from Covid. These programs were important as many of them contributed to the increased income in 2021. Programs such as the Paycheck Protection Program (PPP Loans) were not counted as income until they were forgiven. Most of the producers included in our averages did not apply for forgiveness until 2021, which means the income was not recognized until 2021. Other programs, such as the third installment of the CFAP program received in 2021 and the Employee Retention Credit, (ERC) which was extended into 2021, would have also brought significant income to some operations. While the CFAP program was based on production to help offset market disruptions, both the PPP loans and the ERC programs were implemented to encourage employers to keep employees working. This explains why the data shows the largest operations received almost 330% more than operations with less than $2 million of gross income.