2016 Farm Income

2016 Farm Income

David Sparks Ph.D.
David Sparks Ph.D.
Farm income, assets, and equity are all expected to decline nearly three percent in 2016, while farm debt is forecasted to rise about two percent. But these numbers may not tell the whole story. Allen Featherstone, Kansas State University Department of Agricultural Economics: "There are a couple of things going on. First thing, commodity prices have fallen quite substantially. If you look at USDA numbers they are about 55% of what they were three years ago. If you look at the futures markets, they are probably expected to stay there unless something shocks the market  for a period of 2 to 3 years.   Then, there also is the aspect of increased costs associated with it. The numbers that I tend to follow, and looking at those numbers, on a per acre basis you are spending 20 to 25% more per acre to put the crop in then you spent seven or eight years ago. Looking at that, the current prices we are receiving are about what they were in 2007, 2008 and 2009 however the cost structure is higher from a variable cost perspective and so both the increased cost and the decrease in commodity prices are squeezing the income potential for farmers moving forward. Is there going to be a lot of farm attrition? Part of it is just how long it is going to last. There are farmers struggling and we are seeing some restructuring of loans. We're seeing a lot of farmers need to come up with a stronger business plan."

 Because of the historic highs, Featherstone predicts a downturn, but says the unknown is how long it will last. "The financial situation of the farm sector is currently in excellent shape," Featherstone said, "but farmers need to begin thinking about restructuring debt and adjusting crop insurance levels."

         

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