Bankers See Recovery Coming to Ag Economy
While 2017 is being forecast to be another tough year for the farm economy, things may improve in 2018. That is the message agricultural bankers got at their national conference, happening this week in Indianapolis.
Jason Henderson, economist and head of Purdue Extension, sees another year of slim profits in 2017, but he sees things improving slowly, “I think farmland values will decline for another year.” He said cash rents and land values are going to be some of the last costs to come down and sees at least one more year of downward adjustments before there could be a rebound.
The federal reserve is expected to hike interest rates in December, and Henderson says that is the beginning of some modest inflation for the U.S. Economy. He says that will be good news for agriculture, “This will provide an uplift for agriculture. I see the opportunity for improved profits coming in 2018.” He does not expect the kind of rapid inflation we saw in the 1970s, but a slower growth averaging around 2% a year. He warns, if the U.S. economy gets over heated and interest rates sour, that would be devastating for agriculture.
Henderson sees a slow and steady pace for a recovery in the farm economy with growth in exports and prices for U.S. farm products. He urges farmers to work with their bankers to stay financially stable, “I think the number 1 thing farmers can do is build a relationship with their bankers, figuring out how to partner with them and work with them to move things going forward.” He also suggests farmers get a handle on managing their risks. Henderson adds any investments made by farmers should be focused around productivity.