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Change in US farm sector's financial position and performance in 2020 compared to pre-pandemic expectations: An analysis using financial ratios

Anil K. Giri (Farm Economy Branch, USDA Economic Research Service, Washington, District of Columbia, USA)
Carrie Litkowski (Farm Economy Branch, USDA Economic Research Service, Washington, District of Columbia, USA)
Dipak Subedi (Farm Economy Branch, USDA Economic Research Service, Washington, District of Columbia, USA)
Tia M. McDonald (Farm Economy Branch, USDA Economic Research Service, Washington, District of Columbia, USA)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 26 December 2023

91

Abstract

Purpose

The purpose of this study is to examine how US farm sector performed in 2020, the first year of the pandemic. There were significant supply and demand shocks due to the pandemic. Furthermore, there was significant fluctuation in commodity prices and record high government payments in 2020. This study aims to examine the performance and position of US farm sector (financially) to system (and global economy) wide shocks.

Design/methodology/approach

The authors examine 2020 values for farm sector financial ratios before and after the onset of the Coronavirus (COVID-19) pandemic using the data from the United States Department of Agriculture to understand the financial position and performance of the US farm sector.

Findings

The authors find solvency ratios (which are indicators of the sector's ability to repay financial liabilities via the sale of assets) worsened in 2020 relative to pre-pandemic 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.

Originality/value

This research is one of the first papers to use financial ratios to examine how the US farm sector performed in 2020 compared to expectations prior to the pandemic.

Keywords

Acknowledgements

This research was supported by the Economic Research Service of the US Department of Agriculture. The findings and conclusions in this publication are those of the authors and should not be construed to represent any official USDA or US Government determination or policy.

Citation

Giri, A.K., Litkowski, C., Subedi, D. and McDonald, T.M. (2023), "Change in US farm sector's financial position and performance in 2020 compared to pre-pandemic expectations: An analysis using financial ratios", Agricultural Finance Review, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/AFR-02-2023-0024

Publisher

:

Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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