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Study looks at financial conditions in the US ag industry

Recent economic conditions have raised concerns about the financial health of the ag industry. A new study by the USDA’s Economic Research Service compared current economic conditions to historic levels to understand the severity of the current ag economy.

Nigel Key, an economist with ERS, says the study found that financial conditions have deteriorated since 2012, but are not as severe as the 1980s.

“From a long-run perspective they’re not as severe as they were during the 1980 farm finance crisis or even as bad as they were in 2002,” he says.

But, he says if it continues…“We could see an increasing share of farms under financial stress, but it’s difficult to predict how financial conditions could change going forward,” he says.

The study also determined which types of operations could face the most stress if commodity prices decline further in the future.

“In terms of looking at the types of farms that might face financial stress going forward and found that if gross cash farm income were to fall 10 or 20 percent from 2017 levels, these effects would be the largest for larger scale farms, for farms with a principal operator under age 40, and for dairy farms,” he says.

Key says the study revealed similar trends in loan delinquency rates.

“There’s been an uptick since 2015 in loan delinquency rates from the farm credit system and commercial bank loan, but these delinquency rates still remain below historical average level,” he says.

Key is an author of the study along with Christopher Burns and Greg Lyons.

More information about the report can be found here.

Audio: Nigel Key, Economic Research Service