Gray Skies Over Farm Country
Lenders, economists, and the government are equally dour about the economic outlook for agriculture. Commodity prices are weighed down by large stockpiles, interest rates are going up, and the global economy is slowing. “We are seeing some pockets of difficulty” amid “a very mixed picture” for agriculture, says Farm Credit Council President Todd Van Hoose.
Since 2016, U.S. net farm income has run at half of the peak $124 billion seen at the end of the commodity boom. Income was slightly higher than expected in 2018, due chiefly to USDA payments to mitigate the impact of the trade war. Direct payments to farmers were the largest in 12 years. Even so, income was the second lowest since 2006. “I think it is yet to be determined if this is a new normal,” says USDA Economist Carrie Litkowski.
“As expected, the Corn Belt and Northern Plains have been hard hit by falling farm income,” says Economist David Widmar. Income in Illinois, Indiana, and Iowa plunged by nearly two thirds since the commodity boom. Esther George, president of the Kansas City Fed, says in the Plains, “The farm sector is in a prolonged downturn as a result of declining agricultural prices, made worse by retaliatory tariffs on U.S. farm products.”
USDA projects bumper corn and soybean crops this year, with corn offering better returns than beans. Chief Executive Marc Knisely of AgCountry FCS in the Upper Midwest says corn, wheat, soybean, and dairy farmers faced market prices below their break-even points going into spring. “For the most part, we’re looking at red ink for a lot of these operations,” he says. Fortunately, debt loads generally are at manageable levels and at fixed interest rates, says CEO Mark Jensen of Farm Credit Services of America and Frontier Farm Credit in the western Corn Belt and central Plains.“I will tell you, this is very different from the 1980s.”
“At this point, it seems likely that net farm incomes will be very low in 2019,” says Economist Gary Schnitkey of the University of Illinois. “Saving 2018 income and building working capital seem like good strategies.”
This article was produced in collaboration with the Food & Environment Reporting Network, an independent, nonprofit news organization producing investigative reporting on food, agriculture, and environmental health.