University of Nebraska Agricultural Economist Brad Lubben projects Nebraska net farm income this year could reach around $8 billion (Figure 1). If realized, it would be a record exceeding levels seen in 2011 and 2013 when net farm income topped $7 billion. It would also be a 50 percent increase over the 2020 income and the fourth consecutive year of rising farm income. The increase this year is fueled by higher crop prices and production levels. Compared to last year, when roughly $2.5 billion in federal government assistance flowed to agriculture in the state, a much smaller portion of this year’s income will come from government assistance. Trade assistance payments are in the past, COVID assistance is much less this year, and commodity program payments this year will be minimal. Lubben estimates government assistance this year will be $600 million, with $40-$50 million coming through farm program payments.
Figure 1. Nebraska Net Farm Income
Data from the Federal Reserve Bank in Kansas City also points to a strong farm economy. Loan repayment rates are higher this year compared to years’ past with Nebraska banks seeing the largest turn arounds in rates among states in the District (Figure 2). Data also shows farm loan demand is down compared to previous years. This suggests producers are funding operational expenses through income and not needing to turn to debt. Also, the Federal Reserve Bank in Kansas City shows increases in land values in Nebraska compared to values last year were some of the highest in the district—up 16 percent on non-irrigated cropland, 19 percent on irrigated ground, and 21 percent for rangeland. Land values across the entire Tenth District were up 15 percent.
Figure 2. Loan Repayment Rates
Turning to 2022, generating positive returns will be more challenging—the big question being will commodity prices stay ahead of rising input costs. Rising fertilizer, chemical, and fuel costs point to considerably higher production costs for crop producers. Livestock producers will face higher feed costs. Continued strong commodity prices will be needed for positive returns. Keys for crop producers will include continued strong demand overseas, particularly China, positive margins for ethanol producers, and a strong soybean crush. Lower cattle numbers, along with strong beef demand, suggest higher prices for cattle producers. Global economic growth is also needed to support growing protein consumption.
No doubt 2022 will be more challenging for agricultural producers. But producers will enter the year in a stronger financial positions. And, opportunities for positive returns still exist. Time will tell.