Farm in­come: Sta­ble but erod­ing

Successful Farming - - FIRST CUT -

U.S. farm in­come

is re­gain­ing its foot­ing af­ter tak­ing a tum­ble early this decade in the col­lapse of the com­mod­ity boom. Although USDA says net farm in­come is higher than ex­pected at a fore­cast of $65.7 bil­lion, it will be the low­est since 2006, and the debt-to-as­set ra­tio (an in­di­ca­tor of fi­nan­cial health) is ris­ing for the sixth year in a row.

USDA econ­o­mist Car­rie Litkowski says the trend line for farm in­come “is rel­a­tively flat­ter” and show­ing a bit of sta­bil­ity af­ter the nose­dive of 2014. That said, 2018 would be the fourth year of com­par­a­tively low in­come. The USDA fore­cast, which will be up­dated on Novem­ber 30, did not in­clude the $4.7 bil­lion in Trump tar­iff pay­ments to pro­duc­ers. The aid was an­nounced only a cou­ple of days be­fore the in­come re­port was re­leased.

“Many farm fam­i­lies are in sig­nif­i­cant fi­nan­cial stress right now,” says NFU pres­i­dent Roger John­son. “They are burn­ing through eq­uity. Farm in­come has been cut in half over the past five years, and a ma­jor­ity of fam­ily farm­ers are cur­rently earn­ing neg­a­tive farm in­come.”

The fore­most con­cern for econ­o­mists Brent Gloy and David Wid­mar is the du­ra­tion rather than the mag­ni­tude of de­cline in farm in­come. “The longer the down­turn lasts, the more fi­nan­cial ero­sion will oc­cur,” they write in a blog. “It will be crit­i­cal to care­fully mon­i­tor farm fi­nan­cial con­di­tions. It is im­por­tant not to be­come com­pla­cent about con­di­tions that are ‘some­what poor’ but last for a long time.” If there is no im­prove­ment, “we’d ex­pect pres­sure to re­duce pro­duc­tion costs – farm­land val­ues, cash rents, etc. – to take place.”

Cash re­ceipts from crops and live­stock are ex­pected to be roughly the same as this year as in 2017, but pro­duc­tion costs are up by $12 bil­lion, mean­ing lower in­come. USDA says debts are ris­ing faster than as­sets, so the debt-to-as­set ra­tio would rise to 13.4% this year; it dipped to 11.3% in the boom year of 2012.

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