These Are Tough Days for Ag, But Not the Toughest

Financial conditions in agriculture have been deteriorating recently, with commodity prices and farm income remaining low and debt levels rising—and all of it is exacerbated by international trade tensions. But despite worsening conditions in recent years, the farm economy appears to be relatively stable compared to historical averages, according to a report from the Economic Research Service.

Net farm income has dropped by about 50 percent over the last five years—but the decline came after sector income reached record highs around 2013, so even after the steep drop, it’s close to the average since 1970.

Farm debt, meanwhile, has reached the highest levels since the 1980s farm crisis. But the value of agricultural assets—namely farmland—has appreciated even more rapidly, so the industry’s “debt-to-asset ratio”—a key indicator of financial stability—remains low compared to the long-run average.

The findings, which account for data through 2017 and some estimates for 2018, back up a common assessment from many ag economists: Current farm conditions are difficult, and worsening, but still not as bad as the crisis of the 1980s. Still, ERS notes that agriculture is “in a less prosperous and potentially vulnerable period,” and “extreme financial stress” is already more prevalent for specific operations like poultry, dairy and hog farms.

Source: Politico