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AG ECONOMIC INSIGHTS: FARM DEBT AND WORKING CAPITAL CONTINUE TO DETERIORATE
Ag Economic Insights reports:

To view the complete report, click here.

Last week we reviewed the USDA's latest farm income projections and noted sector-wide incomes are expected to increase again in 2020. Furthermore, current projections reflect an upward trend in farm income since 2016, with levels above the long-run, inflation-adjusted average.

While all this is positive, farm income is only a single measure of the farm economy. The USDA's projections also include a look at sector-wide financial conditions. This week's post considers the continued deterioration in farm debt and working capital.

Farm Debt
Figure 1 shows total U.S. farm debt over the last ten years. Overall, there has been a steady - if not persistent- uptrend in total farm debt. For 2020, total farm debt is expected to reach $425 billion, up from $300 billion in 2012. Over the last ten years, total farm debt has increased at an average rate of 4% annually [1].

Figure 2 shows real (inflation-adjusted) farm debt - categorized into real estate and nonreal estate - since 1960. There are several insights that can be gleaned from figure 2, but in the context of this week's post, consider the trends in each category in recent years. Nonreal estate debt has been mostly unchanged. On the other hand, real estate debt has trended sharply higher. In fact, since 2010 total farm debts have increased by 28%; the vast majority of that increase (82%) was real estate debt.


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