As 2019 ends, so does the decade. Many farmers and ranchers will agree that 2019 has challenged them with unfavorable weather, trade wars and uncertain markets, but farm income increased by over $10 billion from 2018, mainly due to federal trade mitigation payments. Farmers are looking forward to an end to Trade war with China in early 2020. The decade of 2010s has been quite a ride for agriculture. Net farm income will amount to $92.5 billion this year, which is pretty close to where we started the decade, but income charts look like a roller coaster, going from $90 billion in 2010 up to $135 Billion in 2011, down to $110 billion in 2012, back to $140 billion in 2013, and sharply down to $55 billion in 2016. The ride back up to over $90 billion has been slow the past three years resulting in farm debt rising this decade from about $320 billion to a projected $416 billion this year, which is just slightly less than in1980, at the height of the farm debt crisis. That number could be interpreted as a significant problem, but non real estate debt has remained static this decade, and although real estate debt is higher than in1980, farm real estate values have risen at a consistent rate, keeping pace with the increasing amount of real estate related debt.
The outlook for farming and ranching in the next ten years isn’t without challenges though. The USDA projects that prices for major farm commodities like wheat, corn, soybeans and cotton will be very close to the cost of production, leaving narrow profit margins for producers. As a result, the number of farm bankruptcies may continue to grow, stressing farm families and rural communities. While new technology provides increased yields, necessary for a growing world population in the future, the demand for these commodities lags what farmers are producing now. For example, the difficult growing conditions this past spring had very little impact on the total yields of corn and soybeans, which disappointed both growers commodity traders, because prices didn’t soar after crops were harvested. Farm income has peaked three times over the past 75 years. The first was during WWII when the U.S. farmers supplied foodstuffs for European allies and U.S. combat troops fighting in Europe, Asia, and North Africa. The second peak, was triggered primarily by the Soviet Union’s entry into the world grain market in response to a significant production shortfall by Soviet collective farms. The third peak was the period of increasing demand for corn as a result of the adoption of the Renewable Fuels Standard and by short crops in 2010, 2011 and a full-blown crop failure across much of the corn belt in 2012. Another factor involved with balancing supply and demand for food is that as economists continue to preach, food prices are inelastic, which means that a price decline doesn’t expand the quantity of food that consumers demand by very much. Some agricultural economists contend that until a supply management policy is adopted, farmer and ranchers will continue to suffer from long periods of low prices, until a crisis brings higher commodity prices due to a temporary decrease in supply.
An anonymous wag offers this thought, “Many people look forward to the New Year for a new start on old habits.”