While they may have cut back on their capital expenditures, most U.S. farmers remain in good overall financial shape through the first half of the year. In fact, farmers entered 2015 in perhaps its strongest financial condition in over 50 years, according to AgriBank of St. Paul, Minn.
In its May 2015 Insights newsletter, AgriBank reported, “While slowing, real (in 2009 dollars) farm asset values and equity reached all-time highs in 2014. The U.S. farm sector debt-to-asset ratio, a measure of overall farm financial health (lower is better), reached an all-time low level of 10.6% in 2014 and is projected to increase only slightly to 10.9% for 2015 — still well below the values that prevailed in the 1980s and 1990s.”
By comparison, during the 1980s farm crisis, the debt-to-asset ratio reached a 50-year high of 22.2% in 1985. From the mid-1980s through 2014, the ratio showed steady improvement with the exception of a few brief periods when a slight reversal in the long-term downward trend occurred in response to a downturn in the general economy.
Current overall debt levels, measured in real dollars (2009), are significantly lower than in the early 1980s, and overall assets are higher. In addition, and very positive for agriculture, interest rates today are dramatically lower than in the 1980s.
“Of course, note that individual producer financial conditions can vary widely,” says AgriBank, “and some pockets of financial distress could arise if these long-run forecasts are realized. Also, the large majority of aggregate farm asset value is held in real estate (about 81.7% in 2014), so major declines in farmland value can have a substantial impact on the aggregate balance sheet for U.S. agriculture.”
AgriBank is one of the largest banks within the national Farm Credit System, with more than $90 billion in total assets. Under the Farm Credit System’s cooperative structure, AgriBank is primarily owned by 17 affiliated Farm Credit Associations. The AgriBank District covers America’s Midwest, a 15-state area stretching from Wyoming to Ohio and Minnesota to Arkansas. About half of the nation’s cropland is located within the AgriBank District, providing the Bank and its Association owners with expertise in production agriculture. For more information, visit www.AgriBank.com.