Grain farms in Illinois boost liquidity

By Andi Anderson

The liquidity of Illinois grain farms has been a critical focus, especially with notable changes in working capital over the past two decades.

Working capital, the difference between current assets (like cash, inventory, and prepaid expenses) and current liabilities (such as accounts payable and short-term loans), serves as a key indicator of a farm's ability to meet financial obligations as they arise.

Illinois grain farms have seen remarkable increases in working capital, particularly between 2019 and 2022. The median current assets for these farms climbed from $610,805 in 2019 to $1,000,946 in 2022, reflecting a 63.87% increase.

In contrast, median current liabilities slightly decreased, which strengthened overall working capital during this period. This growth aligned with rising incomes due to higher grain prices and increased demand for crops, improving farm liquidity and resilience.

This trend builds on a longer history. Between 2003 and 2006, Illinois farms initially saw modest income growth, which then surged from 2007 to 2013 due to strong commodity markets and high demand, notably for corn and soybeans.

Despite drought challenges in 2012, crop insurance and elevated prices protected farms from severe financial impacts. However, from 2013 to 2019, incomes fell as crop prices declined, leading to a reduction in working capital.

The recent rise in working capital from 2020 to 2022 reflects a recovery in farm incomes, culminating in a record-breaking year in 2022.

In 2023, median current assets and liabilities both declined slightly, leading to a modest 10.42% decrease in implied working capital.

This shift underlines the continued sensitivity of farm liquidity to changing market conditions, particularly commodity prices and production costs.

Overall, the past two decades highlight how Illinois grain farms have bolstered their financial positions, emphasizing the importance of maintaining robust working capital.

This liquidity growth offers a buffer against market fluctuations, helping Illinois farms manage risks effectively and capitalize on future opportunities.

Photo Credit: istock-alenamozhjer