Farm Economy

Farm Economy

David Sparks Ph.D.
David Sparks Ph.D.
Many farms this year are seeing higher net farm incomes than a year ago, but the size of the increase seems to be closely tied to the size of the farms. Are the indicators of financial stress in the farm sector showing an improved situation or just the opposite?

USDA’s latest report on 2019 farm income shows a likely increase from last year, but USDA chief economist Rob Johansson also concludes… “there are financial issues out there and stress”… stress gradually getting worse too, but not pervasive. Johanson says, first… “we've seen a steady increase since 2014 in farm bankruptcies.”

He estimates just under three out of every 10000 farms will go bankrupt this year, twice the rate of just five years ago. Next, the percent of debt the farm sector has, compared to the value of its assets, keeps growing. For 2019, farm debt will likely grow 3.4 %. Asset value is only 2.3. So Johannsen says the debt asset ratio will grow… “Up to 13.42%.” The amount of working capital in the farm sector back in 2012 was over $180 billion. 2019 is down to below 60. But even so,… “nine out of 10 farms are on pretty stable basis”… leaving one in every 10 highly leveraged and in a financially precarious position.

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