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U OF ILLINOIS ECONOMIST ISSUES "AGRICULTURAL ASSETS COMPARED TO DEBT" REPORT: $3.5 TRILLION IN ASSETS, $450 BILLION IN DEBT
Blog by Bradley Zwilling, Illinois FBFM Association and Department of Agricultural and Consumer Economics, University of Illinois

Agricultural assets on a nominal basis in Illinois has been increasing on average five percent since 1991. Data from the United States Department of Agriculture (USDA) and Illinois Farm Business Farm Management (FBFM) are shown to see if increasing asset and debt levels pose problems for the financial health of Illinois farms. In the February 18, 2022 farmdoc daily article we looked at increasing debt levels, however the debt to asset ratio was not increasing at the same rate.



This study looks to evaluate the asset side of the ratio and the impact on debt levels. Measuring these values overtime becomes of greater importance with more variability in the farm economy and rising inflation.

Overall Agricultural Asset Levels
USDA publishes estimates of total agricultural assets in the United States (see Economic Reporting Service, USDA website). This series is available from 1960 onwards and gives the amount of agricultural assets outstanding as of the year-end.

Nominally, agricultural assets where high in 1980 at $1,000 billion (see the nominal line in Figure 1). From 1980 through 1988, agricultural assets were decreasing due to lower values of machinery and land due the farm crisis in the 1980s. Debt levels at this time were also decreasing. By 1988, agricultural assets had declined by 22% reaching a level of $789 billion.

Since 1988, agricultural assets increased on average 4.4% per year. Agricultural debt levels increased on average of 4.0% (see the nominal line in Figure 2) per year in this same period. The rate of increase of assets varied from year-to-year but exhibited no escalating or decreasing trends, except from 2003 to 2006 where assets increased on average 13% per year. The highest rate increases occurred between 2003-2006 and 2011-2012 when increases were 12.8%, 14.6%, 11.5% and 13.8%, respectively. Increases of less than 3% occurred twelve times in this period while decreases happened in 3 years with the greatest at negative 1.7% in 2014-2015.

At the end of 1996, agricultural assets reached $1,003 billion, surpassing the previous high set in 1980. Increasing asset levels are good for agriculture as long as it is gradual. The above asset levels are stated in nominal terms and do not take into consideration inflation's devaluing impacts on the dollar.

Using the gross domestic product - implicit price deflator to state nominal asset levels in terms of 2022 dollars gives a different picture of asset levels (see the real line in Figure 1). In terms of 2022 dollars, agricultural assets started at $2,906 billion in 1980 before declining until 1992. Since 1992, agricultural assets in real terms increased all but five years 2002, 2009, 2015, 2018 and 2019 (and forecasted decreases for 2021 and 2022). Since 1992, the rate of increase averaged 2.8% for real asset levels (2.4% for real debt levels), lower than the 4.4% nominal rate increase. The number for 2014 is the highest level in real terms ever.



To view the complete report, click here.


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