What is the status of the U.S. farm economy?
Show of hands, is it in road gear? Is it motoring along at an average rate? Is it approaching an imminent crash?
While that question may seem curious in a column that frequently takes a pessimistic attitude about the current farm economy, there is a reason for asking.
Secretary of Agriculture Sonny Perdue was called before the Agriculture Committees in both the House and Senate last week to give a report on the farm economy. Keep in mind that both committees, at least the multi-term veterans, just finished working on the 2018 Farm Bill and should know about the farm economy. After all, their work was focused on pulling it out of a sinkhole.
Expectedly, the secretary quote U.S. Department of Agriculture economists (whom he wants to boot out of Washington, but you read about that last week) and said, “Net farm income has fallen nearly 50 percent from its peak in 2013, as most commodity prices have fallen over the past five years while global stock levels have rebounded with several years of record harvests. In 2019, global production will continue to expand, trade challenges will persist and these factors will continue to impact commodity prices.”
Perdue continued, “Our chief economist at USDA, Robert Johansson, calculated that working capital has decreased by 70 percent since 2012. Looking forward, USDA projects 2019 net farm income at $77.6 billion, a $14 billion increase from the projections made last year.”
Data provided by Perdue to Congress and discussed the prior week at the USDA’s Outlook Forum, painted a bleak picture, due, in part, to the rising amount of agricultural debt.
It was at $385 billion in 2018, but has climbed above $400 billion, a level unseen since the farm economy collapse in the early 1980s.
But while Congress was hearing about the red ink in farm family budgets, Johansson’s immediate predecessor, Joe Glauber, wrote an op-ed for the Dow Jones News Service that painted the picture with more green than red.
Glauber said, “The plight of American farmers always makes for good copy, even when the facts don't match the rhetoric. And when media reports suggest that farmers are about to face a financial crisis, based on one or two pieces of cherry-picked data, farm interest groups rush to Congress to ask for more subsidies, on top of the $20 billion a year already being given to crop growers.”
“Pointing to a broader look at economics shows there is no crisis,” Glauber stated. “Farm bankruptcies are higher than they were a decade ago, but bankruptcy filings in 2018 were lower than 2010 and 2011 and about the same as 2012. The number of farm businesses has remained relatively stable since the 1980s.”
Glauber allowed that current trade issues begun by the White House may lead some farmers toward financial failure.