If you are not typically plugged into what’s going on with the farm economy, you can be excused for not knowing that U.S. grain producers have been going through a disastrous three-year period of minimal profitability, declining land values, increasing difficulty in obtaining bank loans, uncertainty over when things will improve and general crankiness.
Across the Corn Belt, farmers have been sucker-punched by plummeting prices in wheat, corn and, to a lesser extent, soybeans.
At the same time, competitors are producing a tsunami of grain that is pushing U.S. farmers toward and into debt.
For many farmers, economic survival means non-farm secondary jobs.
The early word is that 2017 will not provide relief for the growing economic crisis in the heartland.
Relative to 2016 levels, farm sector profitability measures forecast for 2017 range from nearly flat to declining. Net cash farm income, one measure of profitability, is forecast at $93.5 billion ($82.2 billion after adjusting for inflation) for 2017, up 1.8 percent compared to the 2016 forecast. Net farm income, a broader measure of profitability because it includes non-cash values such as inventory flows and economic depreciation, is forecast at $62.3 billion ($54.8 billion after adjusting for inflation) for 2017, down 8.7 percent compared to 2016.
The Federal Reserve Banks of St. Louis, Chicago and Kansas City aren’t oozing optimism either.
Chicago Fed Senior Business Economist David Oppedahl writes: “Survey respondents forecasted the downward trends for farmland values and agricultural credit conditions to continue into 2017.”
The St Louis Fed suggests that farmers’ pockets are increasingly becoming empty, noting: “Most bankers witnessed a year-over-year increase in loan demand in the fourth quarter, and an even larger percentage expect the year-over-year growth to continue in the first quarter.”
The Kansas City Fed was blunter, saying: “Farm income also weakened in the fourth quarter. In fact, farm income fell for the fifteenth consecutive quarter, the longest such streak in survey history. Moreover, 70 percent of bankers expected the downward trend to continue in the first quarter of 2017.”
Unfortunately, this is not the kind of economic crisis that farmers can produce their way out of, at least not in the short term given the generally robust worldwide supplies of grains and oilseeds.
At best, U.S. farmers will find themselves in a holding pattern in 2017, counting on off-farm income to make ends meet.
Since 2013, net farm income has fallen 50 percent.
Let that number sink in a moment before asking yourself a common-sense question: How many businesses would go into the tank over a 50 percent loss in income over three years with grim economic prospects for the new year?
About Dave Dickey
Dickey spent nearly 30 years at University of Illinois at Urbana-Champaign’s NPR member station WILL-AM 580 where he won a dozen Associated Press awards for his reporting. For the past 13 years, he directed Illinois Public Media’s agriculture programming. His weekly column for Big Ag Watch covers agriculture and related issues including politics, government, environment and labor. Email him at firstname.lastname@example.org.
This column reflects the writer’s own opinions and not those of Big Ag Watch.