While times are tough right now, at least they’re not as bad as the 1980s. Farmers can draw similarities from the 1980s to today but it would a number of factors to reach crisis levels farmers saw nearly 40 years ago.
“We are not at that 1980s level type of farm crisis,” said Tanner Ehmke of CoBank to AgriTalk Host Chip Flory. “But the signs are there that maybe we need to start paying attention.”
One specific scenario Ehmke says could quickly become problematic is eroded land prices. So far prices are holding strong but it doesn’t take long for that to change.
“[In the 80s] it was this cascading effect,” he said. “We had a couple of local farmers who declared bankruptcy, had to liquidate and sell their land and values dropped. Then, local land values dropped [for everyone] and balance sheets had people upside down [which lead] to more selling.”
That domino effect kept dragging land values lower for years, putting farmers out of business and creating a lending crisis that hasn’t, and hopefully won’t, be realized like that again.
“I think anyone in ag lending right now will tell you that the balance sheet for agriculture is strong,” Ehmke said. “But it is something we have to be concerned about because credit quality is deteriorating.”
The Rural Mainstreet Index just released another report, this one showing the highest levels for 2019. Non-performing loans, loans that are more than 90 days past due, are more prevalent. In addition, Ehmke said some isolated areas have seen some deterioration in land values—it’s just not widespread.
Farmers are seeing price recovery in livestock and, most recently, dairy prices. In addition, interest rates are far from the 1980s highs.
“[Also,] there’s no sign in land, that we could see a correction or steep correction in land values,” Ehmke says. “The stress is clearly there, which isn’t news for anyone struggling with low commodity prices and persistently rising costs of production. Agriculture as a whole though remains fairly sound.”