Although ag bankers in the Midwest and Plains say the administration's multibillion-dollar trade war payments were a boon to farmers and ranchers, some lenders are still concerned about underlying weaknesses in the sector.
In what it described as its biggest step yet to close the digital divide, the Federal Communications Commission voted on Thursday to establish a “rural digital opportunity fund” to provide up to $20 billion over 10 years for high-speed internet networks in rural America.
Agricultural lending declined during the second half of 2019, and while that reflected lower production costs, it “likely also was due to an increase in revenue from government payments (Market Facilitation Program) connected to trade disputes that lingered through the year,” said the Federal Reserve on Thursday.
Despite the dour mood in the agricultural sector, prices for good-quality farmland held steady in 2019, partly because less land than usual was on the market, said Farmers National Co., a farm management and real estate company.
The Trump administration has sent $10.5 billion in cash to producers since mid-August to mitigate the impact of the Sino-U.S. trade war, aid that comes on top of $8.6 billion paid for 2018 crops and livestock. “Yes, [the payments] are helpful,” said a Kansas banker on Wednesday — and the government should keep writing the checks.
Between a weather-delayed harvest and uncertainties about the demand for their crops, farmers have been slow to sell corn and soybeans this fall. One consequence is tighter margins and revenue pressures on country elevators, said a report from ag lender CoBank.
Fueled by $14.5 billion in Trump tariff payments, U.S. net farm income will climb to its highest total since the commodity boom crested in 2013 and a dramatic rebound from the plunge that accompanied its collapse, the USDA estimated. When crop insurance indemnities are added to "direct farm program payments," a category that includes trade war aid, land stewardship payments and traditional crop supports, the government will provide an unusually high 31 percent of farm income this year.
Low commodity prices and high costs are tightening the credit squeeze on the farm sector, with little expectation of improvement in the near term, according to ag bankers in the Midwest and Plains. Some farmers and ranchers will liquidate assets during the winter to stay afloat, and some highly leveraged operators will be forced out of business, they said.
Rural America was hit harder by the Great Recession than metropolitan areas and has not recovered fully, said the Center for American Progress on Monday. Although rural communities face unique challenges, they have assets for growth that include immigration, natural resources, agriculture, manufacturing and community social capital, the social bonds and civic engagement that create a resilient spirit in a town, the think tank said in an issue paper.