Source: Tri-State Livestock News
So many farmers are dependent on off-farm income in today's economy that lenders say the worst threat to farmers is a general economic recession, the chief economist for the American Farm Bureau Federation said Tuesday.
"Farm lenders say the reason why we can continue to do what we are doing is off-farm income," Farm Bureau Chief Economist John Newton said during a panel discussion by agricultural economists at the Crop Insurance Industry Convention here.
"It is off-farm income that allows folks to continue to farm. Lenders are really concerned about a slowdown in the U.S. economy," added Newton as he presented statistics on the decline in farm income since 2013.
The general U.S. economy is performing well, Newton said, but he is worried because consumer confidence and the CEO confidence index have both fallen.
“Farm lenders say the reason why we can continue to do what we are doing is off-farm income. It is off-farm income that allows folks to continue to farm. Lenders are really concerned about a slowdown in the U.S. economy.”
John Newton, Farm Bureau chief economist
Newton said USDA statistics show that in 2018, gross farm income was $435 billion and production expenses totaled $369 billion, resulting in net farm income of $66.3 billion, which was down $57 billion or 47 percent since 2013.
The 2018 figures included $13.6 billion in government payments, up 18 percent year to year. That included traditional subsidies plus market facilitation payments to make up for trade losses and disaster payment
Net farm income in 2018 was the third lowest over the last 20 years in inflation adjusted terms, with income down in all regions of the country, he said. Without the government payments it would have been the lowest net farm income of all time, he added.
President Donald Trump has tried to address the trade deficit that has grown since the approval of the North American Free Trade Agreement and China joined the World Trade Organization, but that has created "headwinds" for the farm economy and could hurt the overall economy, Newton said.
"No commodity exemplifies what has happened more than soybeans," Newton said.
Soybean exports are 40 percent below previous levels and the soybean stocks-to-use ratio of over 20 percent is unprecedented.
"If we don't see a resolution to [the China trade conflict,]" he said, "I don't see how soybeans can maintain the price they have today." The soybean price, he said, may be $7 to $8 per bushel, not the $9.50 price of today.
Farm debt is at a record level of $410 billion, Newton said. The debt to asset ratio is not as high as it was during the farm crisis of the 1980s, he said, but it is at 13.5 percent and has been rising for the last six years.
USDA has projected net farm income slightly higher for 2019 at $77.6 billion, but it has not provided details of how it came up with that estimate, and it is hard to put projections on 2019 income because it's not known what farmers will plant or what the weather will be like, he said.
"It is a really, really challenging time for U.S. agriculture," Newton said. "We are taking equity out of our operations."
Harun Balut of National Crop Insurance Services and Joe Outlaw, a professor at Texas A&M University, said that crop insurance is vital to maintaining farm stability.
Balut noted that crop insurance purchases vary from one part of the country to the other and said that both the public and private sectors should try to change policies that lead to lower levels of participation in some areas and with some crops.
Outlaw said he believes the cost of crop insurance subsidies is small compared with their impact on the economy, and that he is researching that subject.
As an adviser to congressional committees on agricultural policy, Outlaw noted that crop insurance used to be "hard to sell" to Congress, but now it is the premier product to protect farmers.
He warned, however, "If anyone thnks that the fight is over with people who do not want to help farmers in this manner, they are nuts."