Economists are watching the farm economy numbers closely. They are watching for signs as to the current downturn in the ag economy driving it into a similar spiral seen in the 1980s. Whether producers grew crops, milked cows, or fed beef cattle, 2016 was a challenge. Farmers pulled back on inputs where they could, machinery sales slumped, and prices were bad across the board. Nathan Kauffman, an economist with the Kansas City Federal Reserve Bank, says, “We saw a lot of carry over debt going into 2017 and a significant amount of debt being restructured.” Farm economists are keeping a watchful eye on agriculture debt numbers. The projected 2016 debt-to-asset ratio will rise to 13%.
By way of comparison, the ratio was over 20% in the mid-1980s. There are some clouds on the horizon. American Farm Bureau Economist Bob Young says, “The number of loans or the proportion of loans where the collateral used to secure that note has been the farm land itself took a significant jump in 2016, and that’s concerning.” Kauffman says the extent that farmland value holds up should help soften some of that blow from low prices and the higher ratio.
Source: NAFB News Service