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COVID-19 Working Paper: Farm Sector Financial Ratios: Pre-COVID Forecasts and Pandemic Performance for 2020

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  • Giri, Anil K
  • Litkowski, Carrie
  • Subedi, Dipak
  • McDonald, Tia

Abstract

The sound financial health of the U.S. farm sector is vital because of its importance to food security and for the wellbeing of U.S. farm households and rural communities. Analyzing key financial ratios is one way to examine the financial health of the farm sector. This study compares 2020 values for farm sector financial ratios before and after the onset of the Coronavirus (COVID-19) pandemic. Forecasts from the February 5, 2020, release of the USDA Economic Research Service’s Farm Income and Wealth Statistics data product represent the prepandemic (before) forecasts. Those forecast values are compared to the data released on February 4, 2022, which represent the realized values for 2020 and include pandemic impacts on commodity demand and the policy response to the economic shock. Solvency ratios (which are indicators of the sector's ability to repay financial liabilities via the sale of assets) worsened in 2020 relative to prepandemic expectations. Efficiency ratios (which evaluate the conversion of assets into production and revenue) and liquidity ratios (which are indicators of the availability of cash to cover debt payments) showed mixed outcomes for the realized results in 2020 relative to the pre-pandemic forecasts. Four profitability ratios were stronger in 2020 relative to pre-pandemic expectations. All solvency, liquidity, and profitability ratios plus 2 out of 5 efficiency ratios for 2020 were weaker than their respective average ratios obtained from 2000 to 2019 data.

Suggested Citation

  • Giri, Anil K & Litkowski, Carrie & Subedi, Dipak & McDonald, Tia, 2022. "COVID-19 Working Paper: Farm Sector Financial Ratios: Pre-COVID Forecasts and Pandemic Performance for 2020," Administrative Publications 327332, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersap:327332
    DOI: 10.22004/ag.econ.327332
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    References listed on IDEAS

    as
    1. Giri, Anil & Peterson, Wesley F. & Sharma, Sankalp & Tetteh, Iuliia, 2020. "Ex-Post Analysis of the 2018 and 2019 Market Facilitation Programs," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 35(3), November.
    2. Giri, Anil & Peterson, E. Wesley F. & Sharma, Sankalp & Tetteh, Iuliia, 2020. "Ex-Post Analysis of the 2018 and 2019 Market Facilitation Programs," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304461, Agricultural and Applied Economics Association.
    3. Giri, Anil K. & McDonald, Tia & Subedi, Dipak & Whitt, Christine, 2021. "COVID-19 Working Paper: Financial Assistance for Farm Operations and Farm Households in the Face of COVID-19," USDA Miscellaneous 312953, United States Department of Agriculture.
    4. Litkowski, Carrie & Law, Jonathan, 2021. "COVID-19 Working Paper: A Timely Tool for Evaluating Financial Conditions in Agriculture: USDA Forecasts of the Value of Production in the Face of COVID-19," Administrative Publications 309398, United States Department of Agriculture, Economic Research Service.
    5. Katchova, Ani L., 2010. "An Analysis of the Financial Performance of Beginning Farmers," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61513, Agricultural and Applied Economics Association.
    6. Giri, Anil K & McDonald, Tia & Subedi, Dipak & Whitt, Christine, 2021. "COVID-19 Working Paper: Financial Assistance for Farm Operations and Farm Households in the Face of COVID-19," Administrative Publications 327345, United States Department of Agriculture, Economic Research Service.
    7. Olga Isengildina‐Massa & Berna Karali & Todd H. Kuethe & Ani L. Katchova, 2021. "Joint Evaluation of the System of USDA's Farm Income Forecasts," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(3), pages 1140-1160, September.
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