An array of factors, from foreign competition to slower economic growth at home and abroad, will constrain U.S. farm income in the near term, notwithstanding the impact of trade war and bad weather this year, said a panel of economists on Tuesday. One of them, Seth Meyer of the University of Missouri, said current income levels, which appear lackluster compared to the commodity boom that ended in 2013, are “more normal than we like to think.”
The seven-year boom was a golden era for American agriculture — the best stretch of good times for U.S. farmers since the 1940s, said Meyer. Economist John Newton of the American Farm Bureau Federation said decades can pass between periods of high farm income. The USDA forecasts net farm income of $88 billion this year, highest in five years.
“People aren’t acting like 2019 is better,” said Newton. Farm debt and loan delinquency rates are rising while indicators of financial health, such as the debt-to-asset ratio, are worsening. The rainiest spring in a quarter-century has resulted in smaller-than-usual corn and soybean crops. However, the sector is far healthier than during the farm recession of the mid-1980s, when the debt-to-asset ratio was nearly double this year’s rate of 13.5 percent.
Global agricultural production increased by 30 percent in the past decade, said Newton. But economic growth worldwide is slowing and the China-U.S. trade war has suppressed farm exports, which generate 20 cents of each dollar in farm income.
Net farm income crested at $123.7 billion in 2013 and has averaged $81 billion a year since then although it bottomed out at $62 billion in 2016.
“My point is farm income levels today are not so unusual,” said Meyer, after the discussion sponsored by the Farm Foundation.
The Trump administration has paid $14.5 billion to farmers and ranchers to mitigate the impact of the trade war on U.S. agriculture; $8.6 billion for 2018 crops and livestock and $5.9 billion, as of Monday, for 2019 losses. Payments began in late August with up to $7.25 billion available. The leading states for payments are Iowa, Illinois, Minnesota, Nebraska and Kansas. Two additional tranches of $3.6 billion are possible.
Beyond that, Congress approved $3 billion for disaster aid to agriculture for volcanoes, wildfires, hurricanes and flooding in 2019 and this year.
“It seems to me we have gone back, to a degree, to a (time) of ad hoc programs,” said Keith Coble of Mississippi State University during the panel discussion. “Standing” programs, such as crop subsidies, usually are more equitable and more timely in delivering aid than stopgap packages, he said. With ad hoc payments, Coble said, “there are windfalls and people that don’t get” help. In this year’s Trump tariff payments, adjoining counties can have sharply different rates per acre for assistance.
Meyer is associate director of the FAPRI think tank at the University of Missouri. Last week, FAPRI said corn and soybean production could increase significantly next year, putting a damper on commodity prices, if plantings return to normal. “Unless a trade deal or other factors result in especially strong crop demand, increased supplies could weigh on 2020/21 marketing year prices for corn and soybeans.” Corn and soybeans are the two most widely grown U.S. crops.
“Sectoral measures of farm finances indicate a deterioration in economic conditions since 2012 yet most measures are near long-run — 1970-2017 — average levels,” said USDA’s Economic Research Service in a newly released report on financial conditions.
To listen to an audio recording of the Farm Foundation panel discussion, click here.