Did Farm Working Capital Peak in 2022
Bradley Zwilling of FarmdocDAILY reports the working capital trends for Illinois farmers in their database.
Bradley provided a chart showing the levels of working capital over a 17-year term ending in 2022 (2006-2022). The Illinois Farm Business Farm Management Association breaks their farmers into four separate debt-to-asset tranches. Those with less than 20%, 20-40%, 40-70% and over 70%.
As expected, those with the least amount of debt also had the most working capital. Those with low levels peaked at about $1.45 million of working capital in 2022 while those with more than 70% debt to assets barely got over $100,000.
The second chart shows four different median levels as follows:
Debt to assets ratio,
Working capital amount,
Working capital per operating acre, and
Working capital as a % of gross farm revenue.
Some interesting trends are as follows:
The median debt to assets peaked at 25.8% in 2006, then dropped to a low of 18.2% in 2012, climbed to 21.4% in 2019 and then dropped to a lifetime low of 17.8% in 2022.
Median total working capital was extremely low at $119,841 in 2006, almost doubled in 2007, peaked at $396,050 in 2012, slowly dropped to $236,778 in 2019 and more than doubled to $593,813 in 2022.
Median working capital per operating acre was low $167 per acre in 2006, climbed to $540 in 2012, dropped to $296 in 2019 and peaked at $716 in 2022.
Median working capital as % of gross farm revenue typically should exceed 25% to be considered adequate. In all years, this level exceeded these levels with a low of 32.5% in 2006, 38.9% in 2019 and peaked at 53.4% in 2022.
The bottom line is that farmers enjoyed really good years in 2020-2022 to substantially increase working capital. However, based on our discussions with farmers during 2023 and 2024, especially those that did not market their 2023 corn last year during the spring rally, working capital may be materially impacted in 2023 and 2024.
We will keep you posted.