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Financial Conditions in the U.S. Agricultural Sector: Historical Comparisons

Author

Listed:
  • Key, Nigel
  • Burns, Christopher
  • Lyons, Greg

Abstract

Recent economic conditions and the financial health of the U.S. farm sector have raised concerns among farm policy stakeholders. After peaking around 2012, farm sector income declined while farm debt continued to rise. Farm real estate stopped rapidly appreciating in value, and land prices declined in some regions. Between 2016 and early 2019, interest rates rose—increasing the cost of borrowing for some farmers. Lower commodity prices in the near future would make it more difficult for some farmers to meet their loan obligations and pay for production expenses. Farmers who made substantial investments in machinery or land when commodity prices and farm incomes were high could face elevated risks of financial insolvency. This study compares recent sectoral and farm-level measures of financial performance relative to historic levels to better understand the severity of the current downturn in the agricultural economy. Using data from USDA’s Agricultural Resource Management Survey, researchers disaggregate farm-level measures of financial health across farm types to identify the types of farms that are under the greatest financial stress. To provide additional perspective on the financial health of the sector, the study uses data from agricultural lenders to compare current agricultural loan delinquencies to levels in the recent past. Finally, model results on the effects of a hypothetical decline in gross farm income are used to evaluate the types of farm operations that would be most vulnerable to a further downturn in the agricultural economy.

Suggested Citation

  • Key, Nigel & Burns, Christopher & Lyons, Greg, 2019. "Financial Conditions in the U.S. Agricultural Sector: Historical Comparisons," Economic Information Bulletin 301076, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersib:301076
    DOI: 10.22004/ag.econ.301076
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    File URL: https://ageconsearch.umn.edu/record/301076/files/eib-211.pdf
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    Cited by:

    1. Dorceta E. Taylor & Lina M. Farias & Lia M. Kahan & Julia Talamo & Alison Surdoval & Ember D. McCoy & Socorro M. Daupan, 2022. "Understanding the challenges faced by Michigan’s family farmers: race/ethnicity and the impacts of a pandemic," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 39(3), pages 1077-1096, September.
    2. Bretford Griffin & Valentina Hartarska & Denis Nadolnyak, 2020. "Credit Constraints and Beginning Farmers’ Production in the U.S.: Evidence from Propensity Score Matching with Principal Component Clustering," Sustainability, MDPI, vol. 12(14), pages 1-12, July.
    3. Davis, Christopher & Dimitri, Carolyn & Nehring, Richard & Collins, LaPorchia & Haley, Mildred & Ha, Kim & Gillespie, Jeffrey, 2022. "U.S. Hog Production: Rising Output and Changing Trends in Productivity Growth," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, vol. 2022(Economic ), August.
    4. Dubman, Robert & Key, Nigel & Law, Jonathan & Litkowski, Carrie & Mandalay, Okkar & Subedi, Dipak & Todd, Jessica E. & Whitt, Christine, 2021. "Agricultural Income and Finance Situation and Outlook: 2021 Edition," USDA Miscellaneous 316342, United States Department of Agriculture.
    5. Gaku, Sylvanus A. & Ifft, Jennifer & Byers, Luke, 2022. "Farm Loan Concentration and Financial Risk," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322568, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Agricultural and Food Policy; Agricultural Finance; Farm Management; Financial Economics; Land Economics/Use; Production Economics;
    All these keywords.

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