FAPRI: Continued Pressure on Farm Finances

Farmers can expect a few bright spots in 2019. Net farm income, as well as prices for key crops, are projected to be slightly higher in 2019. But longer-term projections don’t show positive outcomes. ( AgWeb )

Farmers can expect a few bright spots in 2019. Net farm income, as well as prices for key crops, are projected to be slightly higher in 2019. But longer-term projections don’t show positive outcomes.

Net farm income looks to be stagnant over the next decade, resulting in continued increases in the farm sector’s debt-to-asset ratio, according to the 2019 U.S. Baseline Outlook report compiled by Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri.

net farm income
Source: FAPRI

Although it remains well below the levels of the 1980s, the ratio of U.S. farm debts to assets has increased from 11.3% in 2012 to 13.5% in 2018. The outlook is for continued stress on farm finances, with the debt-to-asset ratio averaging 14.8% between 2020 and 2028. 

farm debt - FAPRI
Source: FAPRI

As for farm prices, the projected average 2019-20 prices of soybean, corn and wheat do show slight increases from 2018-19. Soybean prices are projected to average $8.78 per bushel, corn at $3.81 per bushel and wheat at $5.31 per bushel. Further recovery in wheat prices could be limited by continued large global supplies, while cotton prices could fall in 2019-20 in response to increased U.S. production, the report shows. 

Part of the reason crop prices are lower is due to recent growing conditions, according to Patrick Westhoff, FAPRI director. 

“The past six years have featured relatively solid growing conditions worldwide, leading to large crop supplies,” he says.

Increasing U.S. meat supplies continue to weigh on livestock and poultry prices in 2019. The possible impacts of African swine fever in China and other countries have pushed up pork futures prices since the estimates were prepared. 

Key findings from the 2019 U.S. Baseline Outlook:

  • Projected prices for U.S. soybeans and other products affected by current trade disputes remain below levels that would prevail if foreign tariffs were removed. Marketing-year-average (MYA) soybean prices stay below $9.00 per bushel for a second straight year in 2019/20.
  • Projected corn prices increase for a second straight year in 2019/20.
  • Further recovery in wheat prices could be limited by continued large global supplies, while cotton prices could fall in 2019/20 in response to increased U.S. production.
  • Under the 2018 farm bill, more corn, soybean and wheat producers are projected to choose the Price Loss Coverage (PLC) program when they have a chance to make new program elections in 2019.
  • Projected PLC payments total an average of $5 billion per year over the next decade, with other commodity programs adding another $1 billion per year in payments.
  • Crop insurance net indemnities (payments for losses minus producer-paid premiums) average more than $6 billion per year over the next ten years. Both commodity program and crop insurance benefits are very sensitive to weather and market conditions. 

See the complete report of FAPRI’s 2019 U.S. Baseline Outlook.

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