Good Times, Bad Times
by Bob Stallman
The last decade will almost certainly be remembered as a golden age of agriculture in the United States. High global demand, a cheap dollar and bumper crops meant farming and ranching did better than many other parts of the economy. It was a welcome rebound for farmers and ranchers, who have worked through a lot of tough times.
Those record highs in farm income may have tempted folks to spend money instead of socking it away. If farmers and ranchers were like many other Americans, they probably would have done just that. But that’s not how most of us reacted. Sure, we may have bought some new iron, but much of that was a reinvestment in the business and was replacing some very well-used equipment. As farmers, we know that lean times always come back.
USDA census numbers illustrate how farmers and ranchers have built our balance sheets. The department projects total U.S. farm equity will reach nearly $2.7 trillion by year’s end, up more than 20 percent from just $2.2 trillion in 2010. Debt as a percentage of farm assets should fall from 11.8 percent to 10.9 percent, while total assets likely will top $3 trillion, up from $2.5 trillion five years ago. These are some of the best financial ratios for agriculture. Ever.
On the row crop side, we are bracing for what will clearly be tougher times. We know the sector as a whole will register a significant drop in income this year and, if the past is any indicator, very possibly in the next year or two.
USDA projects the nation’s net farm cash income will fall to $87.4 billion by year’s end, down more than a third from 2012’s $137.1 billion. Corn, once $7.63, is just over $3 a bushel now. Wheat, $9.50 a bushel a few years back, is now about $4.50. And the dollar? It’s stronger than it’s been in years, which makes exports a lot harder to sell.