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Headwinds in Agriculture | CoBank Knowledge Exchange Brief

December 6, 2019


Agriculture has always been a cyclical
industry after coming off of record high commodity prices in 2013 farmers and
ranchers saw a fifty percent decline in net farm income with the agricultural
industry under stress farmers ranchers agribusinesses rural communities and
agricultural policy leaders will be keen on three themes playing out in the years
ahead the continuation of low commodity prices the compression of net farm
income and rising debt levels across the agricultural industry cash receipts
across the agricultural industry are down sixteen percent since 2016 with
farmers and ranchers facing two major headwinds a strong U.S. dollar and a
surplus of global commodities with American farmers and ranchers struggling against the headwinds of strong U.S. dollar and global commodity surplus
they’ve been keen on cutting costs at the production level however with net
farm income down fifty percent production costs are only down one
percent since the peak in 2013 with production costs expected to hold strong
through 2017 net farm income is expected to remain compressed in the years
forthcoming as a result of the rising financial stress in production
agriculture and across the agricultural supply chain debt levels have been
rising farm debt to income ratio has risen over six percent for 2017
according to USDA’s latest projections this is a significant increase over the
levels seen leading into the 1980s farm crisis when debt to income levels were 5% this leading indicator of the ag economy is a red flag of what
farmers ranchers and rural communities can expect in the year forthcoming
with the value of the U.S. dollar expected to remain strong through 2017
and with commodity prices that are expected to remain at multi-year lows a
robust international trade policy and a reliable farm safety net are necessary
for America’s farmers ranchers and rural communities to weather the years ahead

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