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2021 Outlook for U.S. Agriculture: The Road to Economic Recovery

Reflecting on the resilience of the American Farmer.  

The tumultuous nature of 2020 impacted American farmers in a personal way. While several dairy farmers were forced to dump their milk, row crop farmers faced an equally devastating reality that led to crops wasting in fields or being plowed over entirely. Even amid immense challenges, American farmers adapted to the changing environment. They demonstrated resilience, grit, and perseverance once again. 

In fact, American farm operators ended the year with a stronger market and higher farm income than at the start of 2020. As the year unfolded, AgAmerica’s Chief Economist, Dr. John Penson, closely monitored the economic landscape to determine how American farmers would be affected in 2021. In AgAmerica’s recent farm publication, The Economic Landscape of U.S. Agriculture in 2021, we explore the road ahead for economic recovery for various U.S. ag sectors and the policy changes that will shape farm finances in 2021. Additionally, we take a deep dive into: 

  • The rise of regenerative agriculture;  
  • The importance of domestic food security;  
  • The critical demand for farm labor; and 
  • The need for a competitive and transparent market. 

The Rise of Regenerative Agriculture 

Climate change has quickly emerged as the most discussed topic in U.S. agriculture. The new administration plans to incentivize farmers to adopt climate-friendly practices that protect the environment through the expansion of conservation programs and financing opportunities. Tom Vilsack, U.S. Department of Agriculture Secretary, has been a vocal advocate for making “carbon banks” more accessible to farm operators—which would pay farmers to adopt cultivation techniques that reduce carbon emissions.  

“I think agriculture is probably the first and best place to begin getting some wins in this climate area. Farmers are prepared for it. Famers are anxious to do it.” 

Tom Vilsack

How Carbon Banks Could Help U.S. Agriculture Reduce Environmental Impact 

According to the Iowa Farm and Rural Life Poll, 51 percent of farmers are already planning on instituting conservation cultivation techniques. The institution of a more regulated “carbon bank” to incentivize farmers to reduce carbon emissions contrasts with this current era of what is often referred to as a “wild west” carbon market. In essence, a structured incentive system through third-party regulation could create a more uniform method of measuring carbon reduction and likewise rewarding it.  

This initiative towards environmental stewardship creates a new opportunity for farmers to adopt practices that will benefit the environment. For instance, according to a recent report published by the American Farmland Trust, if 70 percent of cropland used just two regenerative practices, the impact would be equivalent to removing 53 million automobiles from roadways. This striking illustration attests to the immense impact of the combined efforts of farmers. It also demonstrates the importance of more funding for agricultural research to address these important topics, including research on these climate-smart practices and their efficacy.  

The Importance of Domestic Food Security 

Because China imported less U.S. agricultural products than initially agreed upon, the U.S. only reached two-thirds of its initial export goal for the U.S.-China trade deal. Even so, in 2020, the U.S. achieved an agricultural trade surplus of $2.65 billion. It is important to note that the largest percentage of the U.S.’s agricultural exports go to China. Therefore, the new administration is prioritizing the diversification of U.S. imports in order to build a resilient domestic food system in the face of a potential decline in trade with China in the coming years.

The Essentiality of Farm Labor 

Labor accounts for the third highest expense for farmers, so understanding this complex input is of paramount importance. Despite their critical role in the industry, nearly half of crop farmworkers lack legal status. In fact, only four percent of immigrant farmworkers have obtained U.S. citizenship. In response to these issues, the new administration is promoting a path to citizenship for undocumented essential immigrant workers. 

Furthermore, due to COVID-19, farmworkers faced difficulty in traveling internationally for seasonal work. For instance, many fruit and vegetable farmworkers, who typically travel to American farms for planting and harvesting seasons, chose to stay home to protect their health. Farmers paid additional input costs for COVID-related personal protective equipment to protect the health and safety of their workers. Download The Economic Landscape of U.S. Agriculture in 2021 for more information on farm labor legislation and its impacts on American farmers.

The Need for a Competitive and Transparent Market 

In 2020, the government provided extensive financial support for agriculture. In total, the government provided an estimated $46.5 billion in ad hoc payments to ease the losses farmers experienced. As a result, 2020 ended with a record-high net farm income. This record amount of federal support is not sustainable; however, federal aid for U.S. farmers and ranchers is projected to be cut in half in 2021. Therefore, farmers will need to rely more on market income as opposed to government funding.

2021: The Age of Agricultural Enlightenment 

With 2020 came a sea of challenges that farmers faced with resilience and remarkable innovation. Through it all, AgAmerica stood behind these farmers to help them weather the storm. We continue to evolve with the dynamic agriculture industry as our flexible financing allows farmers to pivot their loan structures to adapt to the shifting economic climate and build operational resiliency.

With personal roots in the farming community, AgAmerica is proud to be a champion of American farmers across the nation. In addition to our unique financing solutions, we continue to develop resources that provide more transparency into this ever-changing industry.

Click the button below for exclusive insight on U.S. agriculture, trade, and legislation from AgAmerica’s Chief Economist Dr. John Penson. 

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