America’s struggling farm economy is heading for even bigger declines, according to recent surveys, and the nation’s top bankers say manufacturers should expect a major drop in sales of new farm equipment.
Inflation-adjusted net farm income, which is a broad measure of profits, is expected to be down by $11.4 billion, or nearly 15 percent, this year compared to 2017, according to USDA’s August Farm Income Forecast.
The government agency reports:
- Inflation-adjusted income will be just slightly higher than 2016, which was the lowest since 2002.
- Farmers will make the lowest real-dollar amount of income since 2009.
- Median Farm Income is projected to be -$1,691 in 2018 and has been negative for the past four years. Farmers are supplementing income with off-farm income to be able to support families.
- Farm debt is forecast to increase by $13.8 billion (3.5 percent) to $406. 9 billion in 2018.
As farmers face a steep drop in income, the prices they will get for their crops and animals is forecasted to remain nearly flat in the foreseeable future. Meanwhile, production expenses are expected to rise by $11.8 billion or about 3 percent in 2018 led by increases in fuel and labor costs.
“All categories of farm businesses are expected to see declines with dairy farm businesses expected to see the largest decline,” USDA reported. “Every resource region of the country is forecast to see farm business average net cash farm income decline as well.”
USDA’s survey is one of four recent reports looking at the farming economy. Purdue University, in a survey in August, found expectations for the future among producers remain lower than in late spring and significantly lower than 2016.
The number of farmers who say they expect good times next year was just 22 percent. The poor outlook has farmers holding back on capital improvements such as machinery and new buildings. Only 26 percent say now is a good time to invest in their farms.
Bank leaders say the rural economy is slowly growing outside of agriculture, but trade wars with China along with weak commodity prices have farmers holding back on spending.
“The tariffs have, and are, costing our ag customers on grain prices and items they must purchase,” said Jim Stanosheck, CEO of State Bank in Odell, Nebraska, in the university’s survey.
Equipment manufacturers and dealers still expect okay numbers in 2018 and they are more aligned than ever on inventory levels, according to a joint survey by Association of Equipment Manufacturers (AEM) and the Equipment Dealers Association (EDA) released in September.
The hope is that foreign nations will agree to play by the rules and trade will pick up, but on the other hand the current trade war could persist.
“There needs to be policies in place that will create new markets for farmers and ranchers,” said Dennis Slater, President of the Association of Equipment Manufacturers (AEM). “The livelihoods of American farmers, and the paychecks for American equipment manufacturing workers, are what's at stake here. We understand the needs to fix issues as it relates to our nation's trade policy and positioning, but tariffs aren’t the answer.”
The surveys show just how hard times are across farm country. The economic impact doesn’t stop at the farm gate. It bleeds over into banking and manufacturing and the jobs associated with those industries not to mention other goods and services like real estate and retail.
Having strong farm policy does more than just help farmers – it helps all of America. While much needs to be done to improve trade, bolster prices and lower costs, a good first step would have been an on-time approval of the 2018 Farm Bill.
Although that didn’t happen, there is still hope to complete the package by the end of the year. Let’s hope Congress acts. Rural America is counting on it.