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UW-EXTENSION

UW-EXTENSION: Our agriculture economy: Looking back and at 2021

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About a year ago, I wrote an article about the 2020 agricultural outlook, with just two sentences devoted to the potential impact of coronavirus on the ag economy.

As we look back on the last 12 crazy months, the impact on food and agriculture becomes clear. We all witnessed the vulnerabilities of our food system in stories of milk being dumped and animals being euthanized due to the slowdown and closure of processing plants. Long lines of cars at food banks and empty grocery store shelves emphasized the critical importance of food access.

Through all of it, we also saw the non-stop efforts of farmers to continue to produce food in the face of so much uncertainty.

As we look forward to 2021, what are agricultural economists predicting? A review of 2020 and thoughts on 2021 were presented during the recent 2021 Wisconsin Agricultural Outlook Forum.

Farm income

Paul Mitchell, UW-Madison ag economist and director of the Renk Agribusiness Institute reviewed 2020’s impact on farm income, which could have been a sad story were it not for government programs like the Coronavirus Food Assistance Program (CFAP) that supported farmers while simultaneously ensuring farm products reached food banks.

These programs, combined with a favorable growing season in Wisconsin and commodity prices rising toward the end of 2020, helped many farms recover financially from a series of difficult years.

There are many reasons to be hopeful for 2021. Commodity prices are trending upward and agricultural land values are up, which is good for farm solvency.

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There are still some uncertainties around the pace of economic recovery and reopening that will impact agriculture. Also, we will begin to see how consumer preferences have changed in the last year, and how long those impacts will last.

Dairy

Mark Stephenson, director of Dairy Policy Analysis at UW-Madison highlighted the impact of coronavirus on the dairy market, which has been a story about markets meeting consumers where they are: at home. A scramble to redirect milk to fulfill retail demand instead of school and restaurant needs and the CFAP programs ensured dairy products had a home.

The demand for cheese and butter took a bit of a hit from closures, but impacts weren’t as bad as predicted due to the resurgence of home cooking. With more parents and kids at home, fluid milk sales rose, reversing a years-long decline in milk consumption.

There is optimism for dairy in 2021 with more restaurants and schools reopening.

Wisconsin dairy farm loss is slowing and almost back to its long term “normal” rate.

Grain

John Heinberg, market advisor for Total Farm Marketing shed light on 2021 corn and soybean markets, which look good at the moment.

The value of the U.S. dollar will have a big impact on demand for U.S. corn and soybeans. If it continues to trend lower, global demand and prices for U.S. corn and soybean prices may increase.

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Eyes are on weather in Brazil, the world’s top soybean producer, and China’s preferred soybean supplier. The Brazilian soybean harvest (happening now), has been impacted by wet weather. Lower yields in Brazil could be good news for U.S. soybeans.

Livestock

Brenda Boetel, Professor and Department Chair of Agricultural Economics at UW-River Falls discussed the processing plant shutdowns and slowdowns of 2020 that led to backlogs in animals needing to be harvested. These issues are expected to contribute to a decline in 2021 production of beef and pork, which will likely result in higher prices for producers.

Overall U.S. protein production in 2020 was strong, bolstered by poultry production. Production in 2021 looks to be stable across the protein industry as a whole.

COVID-19 will continue to impact livestock markets, especially the beef industry, which benefits from diners eating out.

And last but not least, in terms of significance in the upcoming year, as of March 1, the farmers and food production workers of Wisconsin who kept us fed throughout the past year have become eligible for the vaccine, bringing them one step closer to normalcy as they enter the upcoming growing season, with some, but at least fewer, uncertainties than last year.

Leigh Presley is agriculture educator with University of Wisconsin-Madison Division of Extension for Kenosha and Racine counties.

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